Big Banks’ Small Business Loan Approvals Hit New Record in October, According to Biz2Credit Small Business Lending Index™
Strength seen in lending by big banks, small banks, and institutional investors last month
The approval percentage for small business loan applications at big banks ($10 billion+ in assets) inched up one-tenth of a percent to reach 28% for the first time ever in October 2019, according to the Biz2Credit Small Business Lending Index™ released today.
Biz2Credit Small Business Leading IndexTM
Big Banks’ Small Business Loan Approvals Hit New Record in October
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Big Banks
The approval percentage for small business loan applications at big banks ($10 billion+ in assets) inched up one-tenth of a percent to reach 28% for the first time ever in October 2019. Private sector, nonfarm employment rose by 128,000 in October, and the unemployment rate was little changed at 3.6 percent, the U.S. Bureau of Labor Statistics’ Jobs Report issued on Friday, Nov. 1. Notable job gains occurred in food and beverage industry, social assistance, and finance. Many of the jobs are created by small businesses that are borrowing money to fuel their growth.
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“With yet another interest rate cut by the Federal Reserve, small businesses are benefiting from positive economic conditions that are unrivaled in recent times,” said Biz2Credit CEO Rohit Arora, who oversees the monthly research. “It has been a very good year for small businesses that are looking for capital, and I don’t foresee any changes during the rest of 2019.”
Rohit Arora, Biz2Credit CEO
Small Banks
During the recently completed Fiscal Year 2019, SBA loan volume exceeded $28 billion with more than 63,000 approved loans. The approval rate at small banks, which often are SBA-approved lenders, also climbed one-tenth of a percent from September’s figure of 50.3% to 50.4% in October. The government guarantees that SBA loans provide to lenders helps mitigate their risk and makes it more palatable for SBA lenders to grant requests from businesses that might not otherwise qualify for funding.
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“Traditional bank loans and SBA loans are available at smaller banks. Because of the overall strength of the economy, greater numbers of businesses qualify for funding,” Arora explained. “Having approval rates above the 50% mark is indeed a good sign.”
Rohit Arora, Biz2Credit CEO
Institutional lenders
Institutional lenders’ approval rates reached 66%, up a notch from September’s figure of 65.9%.
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“Institutional lenders keep growing in importance for small businesses looking for capital,” Arora said. “The offer loans at attractive rates and terms.”
Rohit Arora, Biz2Credit CEO
Alternative lenders
Small business loan approval rates among alternative lenders dipped to 56.4% last month from 56.5% in September.
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“Alternative lenders provide money to companies that do not qualify for loans from traditional banks,” Arora said. “Even as bank lending remains strong, alternative lenders play an important role a source of capital for many small business owners – especially ones who have credit scores of 650 or less.”
Rohit Arora, Biz2Credit CEO
Credit unions
Credit unions’ approval rate was 39.8% in October, just slightly up from September’s figure of 39.7%, which marked a record low for the lending category since Biz2Credit began analyzing business loan approvals in January 2011.
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“Credit unions should make it a goal in 2020 to either invest in digital loan application capabilities on their own websites or else partner with a FinTech firm that can provide the capability to do so,” said Arora, who oversees the Biz2Credit research. “Although the Member Business Lending cap is a hindrance for some credit unions, the bigger problem is that many credit unions are technologically behind banks and alternative lenders.”
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 |
| 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.