Loan Approval Rates Rebound at Big Banks in June 2017, According to Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend
Lending Continues to Stall at Alternative Lenders, Credit Unions and Small Banks
Loan approval rates at big banks ($10 billion-plus in assets) increased to post-recession highs in June 2017, according to the latest Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend , the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Meanwhile, small banks, alternative lenders and credit unions all experienced a decline in the percent of funding requests they approved. While loan approval rates at institutional investors remained stagnant.
Big Banks
Small business loan approval rates at big banks bounced back in June, improving two-tenths of a percent to 24.3%, matching an all-time Index high. It marked the eighth time in the last 12 months that loan approval rates increased at this category of lenders.
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"For the third consecutive quarter, the Federal Reserve has voted to increase its benchmark interest rate to a range between 1 percent and 1.25 percent in a vote of confidence in the economy. This bodes well for big banks,"
Rohit Arora, Biz2Credit CEO
"Small business lending is strong among mainstream lending institutions. The interest rate increase are resulting in more profitable deals for big banks. This is incentivizing these mainstream lending institutions to approve a higher percentage of loan requests."
Rohit Arora, Biz2Credit CEO
Small Banks
Loan approval rates at small banks dropped slightly in June to 48.7%, down from May's 48.8% figure. It marked the second consecutive month that loan approval rates dropped in this category of lenders.
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"Despite this small dip, small banks are a good source for small business funding, particularly for SBA-backed loans," said Arora, one of the leading experts in small business finance. "Small banks have not crossed the 50 percent threshold."
Rohit Arora, Biz2Credit CEO
Institutional lenders
Institutional lenders loan approval rates in June remained stagnant at 63.8%. However, the percentage marks an all-time high for Biz2Credit's index, continuing an 11-month streak of neutral or positive gains in loan approval rates.
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"The Fed has expressed its confidence in the U.S. economy as the dollar remains strong on global markets, which dictates strong interest from international players in the space," said Arora."This has resulted in more loans being granted from international investors as the category of lenders continues to revolutionize lending."
Rohit Arora, Biz2Credit CEO
Alternative lenders
Loan approval rates dropped at alternative lenders by two-tenths of a percent in June, as non-bank lenders granted 57.5% of the funding requests. This marks one full calendar year of consecutive decreases for this category of lenders.
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"Approval percentages at big banks and institutional investors are at post-recession highs. The result is that alternative lenders get requests from less creditworthy borrowers. These are riskier deals," . "At the same time, banks and institutional lenders can process loan requests quickly and at lower rates, which brings them more attractive borrowers. These are the primary reasons we have seen such a downward spiral for the alternative lender category."
Rohit Arora, Biz2Credit CEO
Credit unions
Loan approval rates at credit unions dropped one-tenth of a percent in June to 40.4%, another new low for this category of funders on Biz2Credit's index.
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"In the FinTech era, credit unions have fallen behind because other categories of lenders have embraced technology. In the process, they lowered their risk, while many credit unions have remained somewhat old fashioned," Arora says. "Credit unions typically process loan requests at a slower rate, and in today's fast paced economy, borrowers simply aren't willing to wait. Credit unions are becoming less relevant in small business lending."
Rohit Arora, Biz2Credit CEO
View Past Months
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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 |
| View Report |
| October 2020 |
Small Business Loan Approval Rates at Banks Declined in October 2020: Biz2Credit Small Business Lending Index™ |
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Small Businesses Capital Is Hard to Secure |
| View Report |
| September 2020 |
Small Business Loan Approval Rates at Banks Fell Again in September 2020: Biz2Credit Small Business Lending Index™ |
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Small Businesses in Limbo Awaiting PPP Loan Forgiveness |
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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.