Small Biz lending approval rates surge at big banks, institutional investors: Biz2Credit Small Business Lending Index
Lending at alternative lenders continues to Falter; Credit union loan approval rates remain stagnant
NEW YORK, NY (March 15, 2017) — Loan approval rates at big banks ($10 billion+ in assets) improved to new post-recession highs in February 2017, according to the latest Biz2Credit Small Business Lending Index™, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Small banks and institutional investors also experienced an uptick in their loan approval rates in an overall favorable month for small business lending. Meanwhile, loan approval rates at credit unions remained stagnant and approval rates at alternative lenders dropped.
Small business loan approval rates at big banks improved to 24.1% in February 2017, marking the seventh consecutive month of increases and the 11th time in a calendar year that approval percentages have increased. Further, loan approval rates at big banks in a year-to-year comparison are up more than one full percentage point, as they slowly creep towards the one-quarter mark.
“There is a confidence in the economy right now, and that is translating to higher loan approval rates at mainstream lending institutions,” suggests Biz2Credit CEO Rohit Arora, who oversaw the research. “Small business owners are optimistic that there are bright days ahead and are applying for capital to invest in growing their businesses.”
For the first time in the last six months, loan approval rates at small banks dropped by one-tenth of a percent to 48.8% in February 2017 from 48.9% in January. The approval rates at small banks dropped below 50% two and a half years ago and have struggled to reach the mark again.
“Although small banks dipped slightly in their loan approval percentage last month, there is some room for optimism,” explained Arora, one of the nation’s leading experts in small business finance. “President Trump has prioritized reforming the Dodd Frank legislature to scale back regulations for community banking institutions. His administration is aggressively working towards reducing the burdensome bill to small banks, which will allow them to lend more freely.”
Institutional lenders’ loan approval rates improved to 63.5%, reaching a new Index high. It was the second time in the last three months that this category of lenders had an uptick in their loan approval rates.
“The stock market and U.S. dollar are very strong and this is attracting a high volume of investors from various parts of the world,” said Arora. “Small business lending is still one of the most profitable sectors to invest in and we are seeing a number of yield-hungry investors getting involved in this space of loans.”
Loan approval rates dropped at alternative lenders in February, as they approved 58.4% of the loan requests they received, down one-tenth of a percent from 58.5% in January.
“Alternative lenders have struggled to adjust to its industry competition, which have caught up to the one advantage they once held – speed of processing loan requests,” explained Arora. “The advancements in technology at big banks and institutional lenders have led to quicker, more efficient loan approvals. Investments in technology enable these big lending institutions to offer affordable loan products as they significantly mitigate risk.”
Loan approval rates at credit unions remained stagnant at 40.8%, the low mark for this category of lenders.
“Credit unions have become an afterthought for small business borrowers,” Arora says. “Competitors are taking market share away from credit unions, which are frequently left with less creditworthy borrowers.”
Founded in 2007, Biz2Credit has arranged more than $3 billion in small business financing. Biz2Credit is focused on funding what’s next for small business. The company leverages data, cash flow insights, and the latest technology to give business owners an automated small business funding platform to fit their financial needs. With over 350 employees globally, the Biz2Credit team – made up of top-notch engineers, marketers, and data scientists – is building the next generation in business lending solutions.Biz2Credit has been named to the Inc. 5000 list and Inc. Magazine’s Private Titans list for 2020, is a three-time winner of the Deloitte Technology Fast 500 and was named a Great Place to Work in 2020 and 2019. Headquartered in New York City, the company recently raised a $52M Series B round of investment in 2019.Visit www.biz2credit.com or Twitter @Biz2Credit, Facebook, and LinkedIn.
About the Biz2Credit Small Business Lending Index
Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business more than two years with an average credit score above 680. Unlike other surveys, the results are based on primary data submitted by more than 1,000 small business owners who applied for funding on Biz2Credit’s online lending platform, which connects business borrowers and lenders.