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Big Bank Approval Rates for Small Businesses Continue to Rise

August 07, 2014, 06:00 AM
Filed Under: Banking News

Small business loan approval rates at big banks hit a post-recession high for the second consecutive month, according to the July 2014 Biz2Credit Small Business Lending Index, the monthly analysis of 1,000 loan applications on

Small business loan approval rates at big banks ($10 billion+ in assets) rose to 20.1% in July from 20% in June, while approval rates at small banks slipped to 50.9% from to 51.4% last month.

“Big banks are becoming increasingly aggressive in small business lending and are adopting technology that makes them more efficient players,” explained Biz2Credit CEO Rohit Arora, who oversaw the research. “Because of their renewed focus on small business loans, larger banks are taking away higher quality customers from smaller competitors.”
Meanwhile, institutional lenders granted 59.3% of the funding requests they received in July, a slight increase from 59.2% in June.

“Institutional firms have roared into the small business segment and created fierce competition for other so-called alternative lenders,” added Arora, one of the nation's leading experts in small business lending.

“This competition is lowering the price of alternative lending products, which is good news for borrowers – particularly those whose credit scores are not high enough to qualify for loans from traditional banks.”

Approval rates at alternative lenders slipped for the sixth consecutive month to 62.9% in July, from 63.2% in June. Credit unions granted 43.5% of loan applications in June, down from 43.7% last 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,” explained Arora.
“However, there is still room for improvement,” Arora added. The SBA still needs more to streamline its Small Loan Advantage program. In spite of verbal support by Maria Contreras-Sweet, the new SBA Administrator, we have still not seen much process improvement in this program with regards to acceptance of eSignatures and other technological advancements.”

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