Small business loan approval rates at big banks ($10B+ in assets) in January 2013 increased to 15.3%, up from the 14.9% rate in December 2012, according to the Biz2Credit Small Business Lending Index, a monthly analysis of 1,000 loan applications on Biz2Credit.com.
 
The 15.3% approval rate at big banks is the highest recorded by the Biz2Credit Small Business Lending Index and marks a four-tenths of a percent jump from the previous month and a 31% increase over the January 2012 figure of 11.7%.

"It appears that big banks are back into the small business lending. Sovereign, CitiBank, and Citizens Bank have been particularly active. This is good news for small businesses in search of capital," said Rohit Arora, Biz2Credit co-founder and CEO, who oversaw the research. “The big banks can no longer just sit on their assets. They are lending again, and this is how it should be."
 
Small bank approval rates increased slightly in January, climbing to 49.9% from 49.8% in December 2012. A year-to-year comparison indicates that the small bank approval rate in January 2013 was also up 5% from the approval percentage of January 2012, when it was 47.5%.
 
"Technology is changing the landscape of small business lending. Big banks are investing a lot of money in their online platforms and streamlining the loan application process. Small banks need to do the same," Arora explained. "The small banks must upgrade their systems and allow online applications for small business loans. It's the only way to can compete now that the big banks are moving aggressively in the marketplace."
 
Credit union approvals of small business loans slipped for the eighth consecutive month to 46.9% in January 2013 from 47.6% in December 2012.

"Credit unions entered the market aggressively in late 2011 and early 2012, but since October they are rejecting more than half of the funding requests from small business owners," Arora explained. "Part of the problem is that the bill to raise the credit unions' cap on small business lending is stuck in the Senate. Like the small banks, they must invest in technology to automate the loan application process. Many credit unions want borrowers to come in, apply to become members, and hand-write a loan application. That way of conducting business is simply too old fashioned for the 21st century."
 
Small business loan approvals by alternative lenders - accounts receivable financers, merchant cash advance lenders, Community Development Financial Institutions (CDFI), microlenders, and others - dipped slightly from the previous month. In January 2013, alternative lending approval rates dropped to 63.7%, down just one-tenth of a percent from 63.8% in December 2012.

"With traditional banks easing credit, the fallout effect is that alternative lenders are getting more requests from lesser qualified borrowers," Arora said. "Still alternative lenders are viable sources of capital for women-owned and minority-owned startups, as well as established businesses with cash flow issues. They were early adopters of technology and had the advantage of quick response in granting loan requests. Thus, they funded a lot of deals - even at higher interest rates - because borrowers needed money quickly. Cash advance companies filled this void and continue to do so."

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 with more than 1,100 lenders nationwide.