Biz2Credit Small Business Lending IndexTM
Small Business Loan Approval Rates Rebound at Big Banks, According to November 2014 Biz2Credit Small Business Lending IndexTM
Lending Approval Rates Reach New All-Time High at Big Banks; Drop for Sixth Consecutive Month at Small Banks
Small business loan approval rates at big banks ($10 billion+ in assets) bounced back in November to 20.8% after a setback in the month of October, according to the November 2014 Biz2Credit Small Business Lending Index, a monthly analysis of 1,000 loan applications on Biz2Credit.com. In October, big banks granted 20.4% of loan requests.
"Big banks have better name recognition and are offering more attractive rates than their smaller competitors. They continue to show their commitment of lending to qualified small business owners," said Biz2Credit CEO Rohit Arora, who oversaw the research. "Meanwhile, their commitment to investment into digitization is paying off as more borrowers seek to do business via smart phones and tablets. Big banks have increased their loan approval rates by 20 percent over the last year."
Meanwhile, for the first time in nearly a year, small banks are denying more than half of their loan requests. The percentage of loans granted by small banks slipped for the sixth consecutive month to 49.8% from 50.2% in October.
"Many of the smaller banks are starting to feel the squeeze of failing to adapt to their competition integrating technology," said Arora, one of the nation's leading experts in small business finance. "More credit-worthy borrowers are turning to big banks and institutional lenders because of their increased willingness to lend and the simplicity of getting financing from these lenders."
Meanwhile, institutional lenders granted 59.9% of the funding requests they received in November, a slight increase from 59.7% in October. Approval rates by institutional lenders have increased each month since Biz2Credit began monitoring this category of lenders in January 2014.
"Institutional lenders continue to capitalize on the decreasing demand of short-term loans," Arora said. "They are taking market share from small banks."
At the same time, approval rates at alternative lenders -- merchant cash advance companies, factors, and other non-bank institutions -- slipped for the tenth consecutive month to 62% in November, from 62.1% in October. Meanwhile, credit unions granted 43.4% of loan applications in November, a slight drop over the approval rate of 43.5% last month as they continue to struggle making a wider presence in the small business finance marketplace.
Lenders Approval %
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About the Biz2Credit Small Business Lending IndexTM
Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business more than two years with an average credit score above 680. Unlike other surveys, the results are based on primary data submitted by more than 1,000 small business owners who applied for funding on Biz2Credit's online lending platform, which connects business borrowers and lenders.