Business Loan Approvals Rise as Optimism Soars
Feb 14th, 2018 @ 4:25 PM by Amber Nelson
Large and small U.S. banks approved a greater percentage of business loan applications in January, according to new data from Biz2Credit.com. At the same time, small business owners are feeling more optimistic than ever about the economic environment.
“Despite some recent bumps, the economy has done well during President Trump’s first year in office, and tax cuts have also added to optimism among small business owners,” said Biz2Credit CEO Rohit Arora. “With the economy showing such good signs, the number of small business owners applying for loans has risen. They are showing confidence and are willing to take risks.”
Big banks – those with more than $10 billion in assets – approved 25.3% of all small business loan applications in January, an increase from 25.2% in December and a new all-time high rate.
Small banks had a loan approval rate of 49.1%, up from 49.0% in December and 48.9% a year ago. Institutional lenders – i.e. pension funds, insurance companies – approved 64.3% in January, unchanged from December but still at a record high.
Alternative lenders and credit unions had a slight decrease in their approval rates in January. Alternative lenders approved 56.6%, down from 56.7%, while credit unions approved 40.3%, down from 40.4% in December. “While there is a continuing push to raise the lending cap limit for credit unions, they have not been successful. Meanwhile, banks, institutional lenders and alternative lenders, which have used financial technology to their advantage, have taken market share from them,” said Biz2Credit CEO Rohit Arora. “I don’t see this trend changing anytime soon, unless the cap is raised and investment in technology occurs.”
A separate survey by the National Federation of Independent Businesses (NFIB) found that the business borrowing data match up with how business owners are feeling. The NFIB Optimism Index rose 2 points in January to a 45-year high. It also reported that 32 percent of entrepreneurs feel now is a good time to expand.
“Main Street is roaring,” said NFIB President and CEO Juanita Duggan. “Small business owners are not only reporting better profits, but they’re also ready to grow and expand. The record level of enthusiasm for expansion follows a year of record-breaking optimism among small businesses.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.