Small Business Loan Approvals at Banks Hit Record Highs, According to July 2019 Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend
Alternative Lending Drops and Credit Unions Sink to a Record Low
Big Banks
Approval rates for small business loan applications rose to another post-recession record (27.7%) at big banks ($10 billion+ in assets), while also climbing above 50% at small banks in July
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“Small business lending remains strong and is growing at big banks and at regional and community banks. Entrepreneurs who have a good credit history are having success in securing capital in 2019,” said Biz2Credit CEO Rohit Arora, who oversees the monthly research derived from more than 1,000 small business credit applications on his company’s online lending platform.
Rohit Arora, Biz2Credit CEO
Small Banks
Small bank approvals of small business loan applications inched up one-tenth of a percent to 50.1% from 50% in June. “The U.S. Small Business Administration (SBA) is the largest economic development agency in the world,” said SBA New York District Director, Beth Goldberg. “With an annual credit line of more than $30 billion allocated by Congress, SBA guaranteed loans help bridge the gap between small businesses that lenders might turn away and those who are able to start or grow companies with financing.” Goldberg added that through the end of June, 2019, SBA had guaranteed $20.6 billion nationwide in small business loans. More-than $650 million of this went to firms in her district, which encompasses New York City, Long Island and seven counties of the Lower Hudson Valley. Meanwhile, the Labor Department’s Jobs Report released on August 5, reported that nonfarm payroll employment increased by 164,000 in July, while the unemployment rate remains at 3.7 percent. The U.S. Bureau of Labor Statistics noted that significant job gains occurred in professional and business services, health care, and social services. “While the Jobs Report numbers slightly exceeded expectations, small business owners are expressing concerns about a tariff war with China, which could cause them to reconsider holiday season hiring and expansion plans,” Arora said. “On the other hand, the Federal Reserve cut interest rates for the first time in 11 years last week, which lowers the cost of capital for borrowers. Overall, rates are attractive right now.”
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“More than half of the applicants who apply at small banks for funding, usually SBA loans, are getting the funding. SBA loans are certainly an important part of the mix,” Arora explained.
Rohit Arora, Biz2Credit CEO
Institutional lenders
Institutional lenders’ approval rates rose one-tenth of a percent to 65.7% from June’s figure of 65.6%.
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“Institutional lenders are playing an increasingly important role in small business financing,” Arora said.
Rohit Arora, Biz2Credit CEO
Alternative lenders
Small business loan approval rates among alternative lenders dropped three-tenths of a percent to 56.8% from 57.1% in June.
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“The renewed strength of bank lending to small businesses has negatively impacted alternative lenders,” Arora said. “High quality borrowers can get cheaper money at banks, but those with mediocre credit histories may still find that alternative lenders are the only ones who will fund them. Alternative lenders help business owners that the banks reject.”
Rohit Arora, Biz2Credit CEO
Credit unions
Credit unions fell below the 40% mark in July for the first time since Biz2Credit began analyzing small business loan approval percentages in 2011. Currently, credit unions are approving 39.9% of loan applications, which represents a record low point.
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“Credit unions are still hurt by the Member Business Lending cap (12.25% of their assets), the aggressiveness of other categories of lenders, and by a lack of digitization,” said Arora, who oversees the Biz2Credit research. “Right now, there is not a lot of momentum in credit unions’ small business lending.”
Rohit Arora, Biz2Credit CEO
View Past Months
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| February 2021 |
Biz2Credit Small Business Lending Index™ Finds Loan Approval Rates in February 2021 Changed Little from January, But Dropped Dramatically from February 2020 |
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As Small Business Businesses Apply for PPP Funding, Approval Percentages for Traditional Loans Plummet |
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| January 2021 |
Biz2Credit Small Business Lending Index™ Reports Loan Approval Rates at Banks Increased Slightly in January 2021, But Are Down More Than 50% from One Year Ago |
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| December 2020 |
Biz2Credit Small Business Lending Index™ Reports Loan Approval Rates at Banks Declined in December 2020, Are Down More Than 50 Percent from One Year Ago |
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Approval percentages for all categories of lenders dropped more than 50% from December 2019 |
| View Report |
| November 2020 |
Biz2Credit Small Business Lending Index™ Reports Loan Approval Rates at Banks Declined in November 2020, Are Down More Than 50 Percent from One Year Ago |
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Approval percentages are down 50% or more for all categories of small business lenders as the pandemic surges |
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About Biz2Credit Small Business Lending IndexTM
The Biz2Credit Small Business Lending IndexTM is an analysis of 1,000 monthly loan applications on the Biz2Credit website. The Index reports the loan approval rates of small business financing requests at Big Banks ($10 billion+ in assets), local and regional banks and non-bank lenders (credit unions, Community Development Financial Institutions (CDFI), micro lenders, and others).
Unlike other surveys, the results are based on primary data submitted by more than 1,000 entrepreneurs who applied for funding on Biz2Credit's online lending platform, which connects small business borrowers with sources of capital.
Results of the Biz2Credit Small Business Lending IndexTM have been reported by The Wall Street Journal, Bloomberg BusinessWeek, Entrepreneur.com, Bloomberg Radio's "The Hays Advantage", SBA Radio, NY Daily News, Crain's NY Business, Michigan Banker, and other media.