Big Banks Approving More Small Business Loans
Dec 17th, 2014 @ 4:55 PM by Amber Nelson
Small business owners found more success getting loans from the nation’s big banks in November than the previous month, according to new data from Biz2Credit, but small banks and alternative lenders actually approved fewer loan applications.
The November 2014 Biz2Credit Small Business Lending Index found that big banks approved 20.8 percent of all small business loan requests they received last month, a 0.4 percent increase from October. Although big bank approvals dipped in October, the overall trend has been toward looser lending for small businesses. Approval rates have risen among big banks for seven of the past eight months.
Why have big banks been able to expand their lending by over 20 percent from this time last year? “Big banks have better name recognition and are offering more attractive rates than their smaller competitors,” said Biz2Credit CEO Rohit Arora. “They continue to show their commitment of lending to qualified small business owners.” He also added that big banks were taking the lead on making applications more technologically-friendly with apps for things like smartphones and tablets.
Those digital improvements are more costly for local banks to make, which may be one reason they have been approving a smaller percentage of applicants for the past six months. In November small banks approved less than half (49.8 percent) of all small business requests, the first time that has happened in over a year. That’s also down from 50.2 percent in October.
“Many of the smaller banks are starting to feel the squeeze of failing to adapt to their competition,” said Arora “… 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.”
Similarly alternative lenders approved fewer loans in November giving the thumbs up to 62 percent of all requests, down from 62.1 percent in October. That marks the tenth month of small business loan approval declines.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.