Smart Borrower Blog

Small Business Loan Approvals Hit Record High at Big Banks, Record Low at Credit Unions


Oct 9th, 2019 @ 10:20 AM by Amber Nelson


Big and small U.S. banks continued to keep the small business lending spigot wide open in September, according to data from Biz2Credit, resulting in record high approval rates.

The Biz2Credit Small Business Lending Index showed that big banks – those with $10 billion or more in assets – approved 27.9% of all small business loan applications in September, a new record high. Big banks approval rates have hit new record highs six of the past seven months.

“Bank lending to small businesses remains strong at big banks and regional and community banks. With the recent Fed announcement that interest rates will drop, I expect business lending will continue to grow for the rest of 2019,” said Biz2Credit CEO Rohit Arora.

Among small banks – those with less than $10 billion in assets – the approval rate was unchanged from August at 50.3%.

“Traditional bank loans and SBA loans are available at smaller banks. Because of the overall strength of the economy, greater numbers of businesses qualify for funding,” Arora said. “Having approval rates above the 50% mark is indeed a good sign.”

Institutional lenders approved 65.9% of all small business loan applications, up from 65.8% in August.

Alternative lenders saw their approval rate fall to 56.5% in September from 56.6% the month before. Borrowers who are normally attracted to alternative lenders – those with lower credit score – are finding banks a little more willing to work with them and at lower interest rates, which has cut into business for alternative lenders.

Credit unions, however, had the worst showing in September, even posting a record low with just 39.7% of applications being approved. That is down from 40% in August.

“Other categories of lenders are all moving to digital applications. I would say that credit unions have lost their way in small business lending in today’s low interest rate environment,” explained Arora. “Certainly, the Member Business Lending cap (12.25% of their assets) does not help. Meanwhile, banks and institutional lenders are more aggressive in small business lending.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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