Big Banks Approve Small Business Loans in Record Numbers
Apr 10th, 2019 @ 8:51 PM by Amber Nelson
March was a good month for getting a small business loan approved, according to data from Biz2Credit. The number of applications approved by big U.S. banks rose one-tenth of a percent to 27.3%, the highest percentage on record.
“Approvals by big banks continue to climb,” said Biz2Credit CEO Rohit Arora. “With strong financials from 2018, many small business owners are seeking capital for growth, and they have proven themselves to be creditworthy borrowers.”
Part of the increase in small business loan approvals is due to a break in Federal Reserve interest rate hikes, “which is good news for borrowers,” said Arora. “Money is flowing to small businesses, while the cost of capital is still reasonable – especially loans from traditional bank loans.” The Fed has decided to leave its target interest rate in the range of 2.25% and 2.5% for the foreseeable future.
Small banks approved fewer applications, however, with a decrease to 49.4% of all small business loan requests, from 49.6% in February. Arora explained that “around this time each year, there often is a hold up because small banks – particularly lenders that process SBA loans — will wait to see the previous year’s tax filings before making a decision.”
Loan application approvals rose to 65.4% among institutional lenders in March, up from 65.2% the month before. “Small business loan-making has proven to be profitable and relatively low risk for institutional lenders, which explains their continued growth in the marketplace,” said Arora.
Among alternative lenders, small business loan approvals inched up to 57.3% from 57.2% in February, while credit union approvals slipped to 40.1%, the previous historic low, from 40.2% the previous month. “Credit unions for the most part have not kept up with technology,” added Arora. “Meanwhile, SBA lending has rebounded, big banks have asserted their presence in the marketplace, and institutional lenders have been active and aggressive in striking funding deals.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.