Small Business Loan Approvals Continue to Hit Record Highs
Sep 11th, 2019 @ 12:24 PM by Amber Nelson
As the economy continues to chug forward, banks big and small are willing to loan more money for small businesses, with loan approvals rising to record highs again in August.
According to data from Biz2Credit, big banks – those with $10 billion or more in assets – approved 27.8% of all small business loan applications last month, the second straight post-recession high.
Small banks boasted a small business loan approval rate of 50.3%, up from 50.1% in July.
“Small business lending is as strong as ever at big banks and at regional and community banks. It appears that 2019 will likely be the best year in history for entrepreneurs in need of financing, so long as they have a solid credit history when they apply,” said Biz2Credit CEO Rohit Arora.
Arora added, “SBA Loans spur small business lending. The government guarantee on the loans make them very attractive for regional and community banks. It’s a very positive sign that approval rates continue to climb above the 50% benchmark.”
The loan approval rate among institutional lenders also rose, climbing to 65.8% in August, up from 65.7% the month before.
Credit unions approved 40% of their small business loan applications, up from its record low of 38.9% in July. “The Member Business Lending cap (12.25% of their assets), the aggressiveness of banks and alternative lenders, and the inability of many credit unions to process online loan applications has significantly hindered credit union lending to small businesses,” explained Arora.
Only alternative lenders saw a decline in approval rates in August, with a slip to 56.6% from 56.8% a month earlier. “Bank lending to small businesses has steadily grown, and this impacts alternative lenders, who typically strike deals with companies that banks have rejected,” Arora said.
The increase in most approval rates has likely been a product of economic momentum. The latest Jobs Report from the Labor Department found that nonfarm payroll employment jumped 130,000 with the unemployment remaining at an ultra-low 3.7%. The Federal Reserve may also be considering an additional rate cur at their September 17-18 meeting. “Interest rates are attractive as it is now. If someone has been sitting on the fence waiting for a more attractive rate, this could be it,” Arora said.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.