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Loan Approvals Rise at Regional Banks and Alternative Lenders

July 11, 2013, 06:52 AM
Filed Under: Banking News

Small business loan approvals at big banks ($10 billion+ in assets) and credit unions all dipped slightly in June 2013, while approval rates inched higher at small banks and alternative lenders, according to the Biz2Credit Small Business Lending Index, a monthly analysis of 1,000 loan applications on

Further, loan approvals at big banks dropped to 16.9% from the all-time Index high of 17.3% in May 2013. However, in a year-to-year comparison, small business lending approvals at big banks are up 52 percent over the figure from June 2012.
“While approvals dropped slightly at big banks in June, overall small business lending rebounded in the first half of 2013. Banks, both large and small, are granting loan requests at much higher rates than they did a year ago,” said Biz2Credit CEO Rohit Arora, who oversaw the research. "Small banks gained a slight bit of market share because they are more adept at offering SBA Express loans, typically under $350,000, which are easier to finalize and come without fees. When big banks start processing more SBA Express loans, we will likely see the approval percentages go up. I expect that this will happen."
Loan approvals at small banks climbed to 49.8% in June 2013 from 49.5% the previous month. In a year-to-year comparison, small banks approved at a higher rate last month than they did in June 2012, when the percentage was 47.5%.
“Small banks are granting SBA loans and continue to be strong players in small business lending,” explained Arora, one of the nation's leading experts in small business finance. “Regional banks are usually more flexible and are approving a higher percentage of small business loans than big banks or credit unions, their main competition."

Approvals at credit unions continue their decline, dropping to 44.8% from 45.0% in May 2013. This represents the lowest approval rate for credit unions since the Biz2Credit Small Business Lending Index began in 2011. In a year-to-year comparison, credit union lending is down almost 20 percent in the twelve months between June 2012-13.
“The return of big banks to the small business credit market further threatens credit unions,” Arora explained. “Lengthy processes to obtain loans at credit unions are often a large deterrent for customers, which have influenced the movement by higher credit-quality customers who are electing other lending platforms as their primary option.”
Small business loan approvals by alternative lenders – accounts receivable financers, merchant cash advance lenders, Community Development Financial Institutions (CDFI), microlenders, and others –increased slightly to 63.4% from the 63.3% rate in May 2013. This is due, in part, to new products introduced by alternative lenders last month.
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.

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