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Small Business Loan Approval Rates Reach Post-Recession High

October 09, 2014, 06:12 AM
Filed Under: Economic Commentary

Small business loan approval rates at big banks reached a post-recession high for the sixth consecutive month, according to the September 2014 Biz2Credit Small Business Lending Index, a monthly analysis of 1,000 loan applications on Small business loan approval rates at big banks ($10 billion+ in assets) rose to 20.6% in September from 20.4% in August.
Meanwhile, the percentage of loans granted by small banks slipped to 50.3% from 50.6% last month. In a year-to-year comparison, small business lending approval rates are up nearly 20 percent at big banks, while remaining almost stagnant at small banks.
“Big banks really have roared back into the small business finance marketplace,” said Biz2Credit CEO Rohit Arora, who oversaw the research. “As the economy continues its slow but steady rebound, small business optimism grows, and entrepreneurs are more willing to invest in their companies.”
Meanwhile, institutional lenders granted 59.5% of the funding requests they received in September, a slight increase from 59.4% in August. Lending approval rates by these institutional lenders has increased every month since Biz2Credit began monitoring this category of lenders in January 2014.

"We are seeing more creditworthy applicants get funding from institutional investors, whose interest rates are more attractive than those of other non-bank lenders,” explained Arora, one of the nation’s leading experts in small business lending.

At the same time, approval rates at alternative lenders -- merchant cash advance companies, factors, and other non-bank institutions -- slipped for the eighth consecutive month to 62.6% in September, from 62.7% in August. Credit unions granted 43.4% of loan applications in September, which matched its loan approval rate last month. However, a year-to-year comparison shows that lending approval rates at credit unions are down as they continue to be an afterthought by small business loan applicants.
To view the historic chart of the Biz2Credit Small Business Lending Index, click here.

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