Bank Lending to Small Companies Mixed in March 2014; Biz2Credit Small Business Lending Index Reports Drop in Approval Rates at Big Banks and Rise in Small Banks
Approval Rates by Alternative Lenders and Credit Unions Slip, While Lending by Institutional Investors Climbs
Big Banks
Small business loan approval rates at big banks ($10 billion+ in assets) dropped to 18.8% in March 2014 which earlier stood at 19.1% in February, reported Biz2Credit Small Business Lending Index - a monthly analysis of 1,000 loan applications on Biz2Credit.com. However, in a year-to-year comparison, lending approval rates at big banks still have increased nearly 20 percent.
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"Big banks rely on tax data to process non-SBA loans. Since tax season is always a busy time of the year for CPAs who are preparing tax returns, they have less time to pull together statements for business owners seeking loans. This slows the loan application process."
Rohit Arora, Biz2Credit CEO
"Big banks typically process more conventional loans for larger firms than SBA Express Loans, which are more popular with companies that need less than $350,000."
Rohit Arora, Biz2Credit CEO
Small Banks
Small business loan approval rates at small banks increased to 51.6% in March 2014, up from 51.4% last month. Small bank lending approval rates have increased over the last three months and four out of the last five months
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"The SBA Express and Small Business Loan Programs are becoming increasingly popular among small banks". "These types of loans are 85 percent guaranteed by the SBA, and there are no guarantee fees for the borrowers, which makes them very appealing to small banks."
Rohit Arora, Biz2Credit CEO
Institutional lenders
Institutional Lenders approved 58.1% of the funding requests they received in March, a moderate increase from 56.6% in February. Lending approval rates by institutional lenders have progressively increased its loan approval rates since it was first introduced as a category to the Biz2Credit Small Business Lending Index in January 2014. Lenders include credit funds, insurance companies, family funds, and other yield-hungry, non-bank financial institutions that typically offer more competitively priced loan options than alternative lenders in amounts up to $1 million.
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Alternative lenders
Alternative lenders decreased for the third consecutive month to 63.6% in March from 63.9% in February 2014. Alternative lenders are starting to feel the squeeze from banks and institutional lenders, which are attracting higher quality borrowers who are willing to shop around.
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"As economic conditions continue to improve, more creditworthy borrowers elect to seek funding from traditional lenders, such as banks and institutional lenders, which offer lower interest rates". "Small company owners want to avoid daily payments that cash advance firms charge on short-term loans. The effective interest rate can reach upto 30-40% which is too high for most businesses."
Rohit Arora, Biz2Credit CEO
Credit unions
Meanwhile, credit unions experienced a slight increase in lending approvals. In March, small business loan approval rates at credit unions improved from 43.3% in February to 43.6%. Though, lending approval rates by credit unions are down by nearly 5% in a year-to-year comparison.
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"Credit unions are increasingly planning to adopt SBA Express Loans. If they do not become involved in SBA loans, the real likelihood is that their small business lending will continue to slide," added Arora.
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 |
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| 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.