Big banks have long been accused of turning a blind eye to the credit needs of small businesses, but things are looking up now.
According to the March 2016 Biz2Credit Small Business Lending Index, monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com, loan approval rates at major banks and institutional lenders reached new heights.
In contrast, approval rates fell slightly for smaller banks, credit unions and alternative lenders.
Highlights
Some of the key findings from the monthly survey include:
- Major banks approved 23% of funding requests in March, up two tenths of a percent from February 2016,
- Institutional lenders improved their approval ratings to 62.8% from 62.7% in February,
- Smaller banks granted 48.7% of funding requests, down two tenths of a percent from 48.9% in February,
- Loan approval rates from alternative lenders fell to 60.7% from 60.8% in February,
- Credit unions granted 42% of loan applications, down from 42.1% in February.
Small business loan approval rates see spike in small business loans
Businesses looking to get a small business loan approved can now expect a better response from big banks and institutional lenders.
“Big banks continue to loosen the tap and allow greater free flow of capital to small businesses,” said Biz2Credit CEO Rohit Arora. “International funds are coming to market. Because the yields on small business loans are attractive, a growing number of institutional lenders are getting in on the game.”
It should be noted that major banks and institutional lenders have been increasing the percentage of their overall loans to small businesses for some time.
Decline in small banks and credit unions
In contrast, approval rates for small business loans at smaller banks and credit unions continued to decline.
“Credit unions continue to slide as players in small business lending,” says Arora, “This downward trend has been going on for some time. They simply cannot compete to attract quality, creditworthy borrowers.
Arora, however, expects the situation to change. “Smaller banks frequently push SBA loans, which mitigates their risk, but requires a lot of documentation. Once companies file their 2015 tax returns, expect small bank loan approval percentages to increase.
As a business owner, if you’re wondering how you can get approved for a small business loan, you need to understand what lenders are looking for.
For its monthly index, Biz2Credit analyzed loan applications ranging from $25,000 to $3 million from businesses that had been in business for 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 have applied for financing on Biz2Credit’s online lending platform, which connects corporate borrowers and lenders.
Image: Biz2Credit
