Small Business Loan Approvals Top Record Highs
Jun 20th, 2018 @ 7:02 AM by Amber Nelson
Big banks – those with more than $10 billion in assets – approved 25.96% of all small business loan applications in May, up from 25.7% in April and the highest level since before the recession. “May was another strong month for banks as they have benefitted from the overall strength of the economy, ” said Biz2Credit CEO Rohit Arora. “The unemployment rate hit an 18-year low, and average hourly pay rose 2.7 percent from a year prior. Notably, the Labor Department reported employment in construction continued on an upward trend in May with more than 25,000 new jobs created. There were also large increases in manufacturing, transportation and warehousing jobs. The U.S. economy is strong right now.”
Institutional lenders approved 64.7% of all submitted small business loan requests, an all-time record high for that group. “Institutional investors are seeking high yields, and small business lending,” Arora said. “Foreign investors are continuing to become involved. Small business lending is becoming a very important asset class for institutional lenders, who are able to offer funding at reasonable interest rates and term lengths.”
Small banks – those with less than $10 billion in assets – posted an approval rate of 49.4%, the highest point in three years.
Credit unions and alternative lenders were not able to keep up with the growth of other lenders in May. Credit unions approved 40.1% of all small business loans, down from 40.0% in April. Alternative lenders had an approval rate of 56.4% in May, unchanged from the month before. “Credit union lending to small business has stagnated,” Arora said. “Not much has changed for them in the past couple of years.”
The data comes from more than 1,000 small business loan applications on Biz2Credit.com.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.