Rohit Arora
Rohit Arora

Big bank business loan approval rates hit post-recession high

Business loan approval rates at big banks ($10 billion-plus in assets) hit a post-recession high of 25 per cent in October 2017, according to the latest Biz2Credit Small Business Lending Index, a monthly analysis of more than 1,000 small business loan applications on

Small business loan approval rates at big banks climbed two-tenths of a percent to reach the 25 per cent benchmark from 24.8 per cent in September.

“Big bank lending to small business continues to climb to the point that one-in-four loan applications are approved. During the darkest point of the post-recession credit crunch, they granted less than one-in-10 requests. We have come a long way,” said Biz2Credit CEO Rohit Arora, who oversaw the research.

Rohit Arora
Rohit Arora

“The big banks are making a lot of traditional small business loans, which take less time to process than SBA loans. They also are granting a lot of working capital requests,” Mr. Arora added. “Stock markets continue to perform well, and Trump’s tax cut plan is viewed as good news for business owners. Entrepreneurs have a better chance of obtaining funding now than at any other time in the past decade.”

Meanwhile, approval percentages at small banks dipped to 48.9 per cent in October from 49.1 per cent from the previous month.

“Despite a drop in approval percentages, small banks are still processing a large number of SBA-backed loans,” Mr. Arora said. “Nearly half of the funding requests by small businesses at small banks are approved. This shows that the U.S. small business credit market is strong.”

Institutional lenders’ loan approval rates again improved by one-tenth of a percent in October to 64 per cent, a new high for the category in the Biz2Credit Small Business Lending Index.

“The economy is doing well, the jobs report was solid, and investors from beyond America’s shores are entering the small business credit marketplace with success,” Mr. Arora said. “All of these factors instil confidence in business owners who are contemplating start-up funding or expansion financing.”

Loan approval rates among alternative lenders continue to drop; approval rates dipped two-tenths of a percent in October to 56.8 per cent. Approval percentages for alternative lenders have experienced a slow decline as 2017 draws to a close.

“Alternative lenders are often ‘lenders of last resort’ because of their high interest rates. However, they play an important role in small business finance because they are willing to fund businesses with poor credit scores or no credit history at all,” Mr. Arora explained.

Loan approval rates at credit unions dropped a tenth of a percent to 40.2 per cent, a new low point for lenders in this category.

“Many credit unions seem averse to setting up systems for digital applications,” Mr. Arora said. “They haven’t invested the amount of money that banks, alternative lenders, and other lenders have made into developing online loan applications.

“This is an ongoing issue that I just don’t see changing.”

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