Small business loan approval rates at big banks reached a post-recession high for the third consecutive month, according to the August 2014 Biz2Credit Small Business Lending Index, the monthly analysis of 1,000 loan applications on Biz2Credit.com.
Small business loan approval rates at big banks ($10 billion+ in assets) rose to 20.4% in August from 20.1% in July, while the percentage of loans granted by small banks slipped to 50.6% from 50.9% last month.
“Big banks are utilizing their brand recognition and their investment in technology that makes processing of non-SBA loans more swift and efficient,” explained Biz2Credit CEO Rohit Arora, who oversaw the research. “As the economy has improved, and the optimism of small business owners seems to be strong, entrepreneurs are willing to invest in their growth potential. Big banks are aggressively granting small business loan requests and are attracting higher quality customers from competitors.”
Meanwhile, institutional lenders granted 59.4% of the funding requests they received in August, a slight increase from 59.3% in July. Approval rates have risen every month since Biz2Credit began monitoring the category in January 2014.
“Institutional investors are quickly becoming important players in small business lending, and they are taking market share from alternative lenders,” added Arora, one of the nation's leading experts in small business lending. “Meanwhile, the interest rates charged by non-bank lenders continue to drop. This benefits entrepreneurs in search of capital.”
Approval rates at alternative lenders -- merchant cash advance companies, factors, and other non-bank institutions -- slipped for the seventh consecutive month to 62.7% in August, from 62.9% in July. Credit unions granted 43.4% of loan applications in August, down from 43.5% the previous month.
“The financial health of small businesses has improved over last 12 months thus creating a demand for more reasonably priced, longer term products which institutional players – insurance companies, credit funds, family funds, and other yield-hungry, non-bank financial institutions – can provide,” Arora said.