Loan Approval Rates Drop at Banks and Alternative Lenders in May 2017, According to Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend
Institutional Lenders Experience a Slight Increase
Loan approval rates at big banks ($10 billion-plus in assets), small banks, alternative lenders and credit unions dipped slightly in May 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.
Big Banks
Small business loan approval rates at big banks fell two-tenths of a percent from April's 24.3% figure, a post-recession high, to 24.1% in May 2017. The drop comes after approval rates at big banks climbed for most of the year.
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"Despite the overall strength of the U.S. economy, there are concerns about recent acts of terror, perceived instability of President Trump's administration, and his erratic behavior, "
Rohit Arora, Biz2Credit CEO
"Trump's promised tax cuts have not happened yet, and we don't really know if his overhaul of Obamacare will help small business owners. These factors cause anxiety in credit marketplaces. We've seen it on our platform as the volume of loan applications slowed in May."
Rohit Arora, Biz2Credit CEO
Small Banks
Loan approval rates at small banks also dropped in May to 48.8%, down from April's 49% figure. Small banks have flirted with the 50% mark, but have not reached it since October 2014.
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"Small banks are approving almost half of their business funding requests. The demand for SBA-backed loans in the marketplace remains strong. As SBA loans are popular with both borrowers and lenders," one of the nation's leading experts in small business finance."
Rohit Arora, Biz2Credit CEO
Institutional lenders
Institutional lenders loan approval rates in May improved slightly to 63.8%, another new high on Biz2Credit's index. It marked the fifth time in the past six months that this category of lenders showed an increase in funding approval percentages.
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"The U.S. dollar remains strong against the euro, the British pound, and other international currencies. For this reason, foreign investors continue to look for high yields from America's small business credit marketplace, "said Arora. "There is no denying, however, that global investors have some anxiety about President Trump's performance in office thus far."
Rohit Arora, Biz2Credit CEO
Alternative lenders
Loan approval rates dropped at alternative lenders by two-tenths of a percent in May, as non-bank lenders granted 57.7% of the funding requests. This marks nearly one year of consecutive decreases for this category of lenders.
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"As banks and institutional investors close deals at levels that are still quite high, alternative lending has lost its attractiveness. Alternative lenders charge much higher rates, and this makes them lenders of last resort for many borrowers, "."Small business owners are able to secure financing at lower costs from other types of lenders fairly quickly. This hurts alternative lenders."
Rohit Arora, Biz2Credit CEO
Credit unions
Loan approval rates at credit unions dropped one-tenth of a percent in May to 40.5%, another new low for this category of funders on Biz2Credit's index.
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"Credit unions continue to trend downwards in their approval percentages, " Arora says. "Their volume is low, and they are becoming less relevant in small business lending. I don't see this changing any time soon."
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 |
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| 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.