Small Business Loan Approvals by Big Banks Hit Post-Recession High
Nov 22nd, 2017 @ 9:33 PM by Amber Nelson
America’s big banks approved 25% of all small business loan requests in October, according to data from Biz2Credit, the highest level since the end of the Great Recession.
The Biz2Credit Small Business Lending Index rose two-tenths of a percent from 24.8% in September. One year ago, the approval rate among big banks (those with $10 billion or more in assets) was just 23.5%.
“Big bank lending to small business continues to climb to the point that one-in-four loan applications are approved. During the darkest point of the post-recession credit crunch, they granted less than one-in-ten requests. We have come a long way,” said Biz2Credit CEO Rohit Arora. He added,”The big banks are making a lot of traditional small business loans, which take less time to process than SBA loans. They also are granting a lot of working capital requests,” Arora added. “Stock markets continue to perform well, and Trump’s tax cut plan is viewed as good news for business owners. Entrepreneurs have a better chance of obtaining funding now than at any other time in the past decade.”
Institutional lenders were also able to slightly increase their approval rates in October, to 64%, a record high, up from 63.9% in September.
Small banks, credit unions, and alternative lenders decreased their percentage of small business loan approvals. Small banks approved 48.9% of requests in October, down from 49.1%. Even still they are approving a much greater percentage than big banks. “Nearly half of the funding requests by small businesses at small banks are approved,” Arora commented. “This shows that the U.S. small business credit market is strong.”
Credit unions approved 40.2% of all small business loan proposals, down from 40.1%, falling to an all-time low. “Many credit unions seem averse to setting up systems for digital applications,” Arora said. They haven’t invested the amount of money that banks, alternative lenders, and other lenders have made into developing online loan applications. This is an ongoing issue that I just don’t see changing.”
Alternative lenders’ approval rate fell to 56.8% in October down from 56.6% in September.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.