Interest Rate Hikes Push Small Business Loan Approval Percentages Higher at Big Banks in March, According to Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend
Small Increases Mean Millions in Profits for Banks with $10 Billion or More in Assets
ahrefstartSmall business loanahrefend approval rates for big banks (25.5%) continued the upswing with yet another new high last month, according to the Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend (March 2018 figures) released today. The monthly analysis examined more than 1,000 credit applications from small businesses on Biz2Credit.com.
Big Banks
Big banks (assets of $10 billion+) are granting more than one-quarter of the small business loan applications they receive. The 25.5% approval percentage, up one-tenth of a percent from February 2018, represents a high point for big banks.
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"With the Federal Reserve's continuing path of interest rates increases, small business loans are becoming more and more profitable. A small rate hike means tens of millions of dollars in profit, since the big banks cost of capital has not changed, "
Rohit Arora, Biz2Credit CEO
"Big banks have a larger deposit base, and they can be more aggressive in lending, especially in a strong economy."
Rohit Arora, Biz2Credit CEO
Small Banks
Small business loan approval rates climbed slightly at regional and community banks. Small banks approved 49.0% of the funding requests they received in March, down two-tenths from February.
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"Small banks typically process a lot of SBA loans, which put weight on the previous year's tax returns. Many businesses that have to submit returns by March 15 file for extensions, and their accountants are operating on overdrive until April 15, " . "This happens every year, especially for small banks that make SBA loans. I expect their approvals to pick up again in May, after tax season ends." "Big banks are extending lines of credit, and they look at accounts receivable. SBA loans are tax return-driven. This is why the big bank approvals increased, while small bank approval percentages dropped in March," Arora added.
Rohit Arora, Biz2Credit CEO
Institutional lenders
institutional lenders reached a new Index record 64.5%, up one-tenth from February. These lenders (pension funds, insurance companies, and others), continue to be important players in small business lending.
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"Institutional investors continue to gain traction in the small business credit marketplace," "Just a few years ago, they were not very involved in small business loans, but they have learned that it is quite profitable and the risks of default have been quite low. These lenders offer attractive interest rates and terms."
Rohit Arora, Biz2Credit CEO
Alternative lenders
Loan approval rates among alternative lenders dipped slightly to 56.5% from February's 56.6 percent. Approval percentages have slipped every month for almost two years, with the exception of a small up tick in November 2017.
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"Alternative (non-bank) lenders play an important role for companies that have immediate cash flow problems and for small business owners who do not qualify for traditional bank loans," Arora explained. "Their cost of capital is high, but in a cash crunch, alternative lenders can throw a lifeline to a company that has a less than stellar credit history."
Rohit Arora, Biz2Credit CEO
Credit unions
Credit unions approved 40.1% of loan applications in March, a one-tenth of a percent drop from February and a new record low for the Biz2Credit Small Business Lending Index.
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"Credit unions traditionally have been a good source of loans for small businesses, but some of their market share have been overtaken by other non-bank lenders," Arora said. "Unless they invest more into financial technology (FinTech), this category will remain stagnant."
Rohit Arora, Biz2Credit CEO
View Past Months
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| July 2020 |
Small Business Loan Approval Rates at Banks Rose in July 2020: Biz2Credit Small Business Lending Index™ |
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Improvement in Approval Percentages at Banks and Institutional Lenders for Companies Applying for Non-PPP Loans, While Alternative Lenders and Credit Unions Slip |
| View Report |
| June 2020 |
Small Business Loan Approval Rates Rebounded in June 2020: Biz2Credit Small Business Lending Index™ |
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Improvement in Approvals for Companies Applying for Non-CARES Act Loans |
| View Report |
| May 2020 |
Small Business Loan Approval Rates Rebounded in May 2020: Biz2Credit Small Business Lending Index™ |
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Improvement in Approvals for Companies Applying for Non-CARES Act Loans |
| View Report |
| April 2020 |
Small Business Loan Approval Rates Dropped to Record Lows in April 2020: Biz2Credit Small Business Lending Index™ |
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PPP Lending Dominates Small Business Lending, but Some Companies Applied for Non-CARES Act Funding |
| View Report |
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.