NEW YORK, NY, April 8, 2014 – Small business loan approval rates at big banks ($10 billion+ in assets) dropped to 18.8% in March 2014, down from 19.1% in February, according to the Biz2Credit Small Business Lending Index, a monthly analysis of 1,000 loan applications on Biz2Credit.com. However, in a year-to-year comparison, lending approval rates at big banks still have increased nearly 20 percent.
“Big banks rely on tax data to process non-SBA loans. Since tax season is always a busy time of the year for CPAs who are preparing tax returns, they have less time to pull together statements for business owners seeking loans. This slows the loan application process,” explained Biz2Credit CEO Rohit Arora, one of the nation’s leading experts in small business lending. “Big banks typically process more conventional loans from larger firms than SBA Loans, which are more popular with companies that need less than $350,000.”
Small business loan approval rates at small banks increased to 51.6% in March 2014, up from 51.4% last month. Small bank lending approval rates have increased for the third consecutive month and in four of the last five months.
“The SBA Express and Small Business Loan Program are becoming increasingly popular among small banks,” said Arora, who oversaw the research. “These types of loans are 85 percent guaranteed by the SBA, and there are no guarantee fees, which makes them very appealing to small banks.”
Meanwhile, credit unions experienced a slight increase in lending approvals. In March, small business loan approval rates at credit unions improved from 43.3% in February to43.6%. Though, lending approval rates by credit unions are down nearly 5% in a year-to-year comparison.
“Credit unions are increasingly planning to adopt SBA Express Loans. If they do not become involved in SBA loans, the real likelihood is that their small business lending will continue to slide,” added Arora.
Alternative lenders decreased for the third consecutive month to 63.6% in March from 63.9% in February 2014. Alternative lenders are starting to feel the squeeze from banks and institutional lenders, which are attracting higher quality borrowers who are willing to shop around.
“As economic conditions continue to improve, more creditworthy borrowers elect to seek funding from traditional lenders, such as banks and institutional lenders, which offer lower interest rates,” Arora said. “Small company owners want to avoid daily payments that cash advance firms charge on short-term loans. The effective interest rate can approach 30-40%. That is too high for most businesses.”
Institutional Lenders approved 58.1% of the funding requests they received in March, a moderate increase from 56.6% in February. Lending approval rates by institutional lenders have progressively increased its loan approval rates since it was first introduced as a category to the Biz2Credit Small Business Lending Index in January 2014. Lenders include credit funds, insurance companies, family funds, and other yield-hungry, non-bank financial institutions that typically offer more competitively priced loan options than alternative lenders in amounts up to $1 million.
To view the historic chart of the Biz2Credit Small Business Lending Index, visit http://www.biz2credit.com/small-business-lending-index/march-2014.html.
About the Biz2Credit Small Business Lending Index
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 1,200 lenders nationwide.
Founded in 2007, Biz2Credit has arranged more than $1 billion in small business funding throughout the U.S. and is widely recognized as the #1 online credit resource for startup loans, lines of credit, equipment loans, working capital and other funding options. Using the latest technology, Biz2Credit matches borrowers to financial institutions based on each company’s unique profile — completed in less than four minutes — in a safe, efficient, price-transparent environment. Biz2Credit’s network consists of 1.6 million users, 1,200+ lenders, credit rating agencies such as D&B and Equifax, and small business service providers including CPAs and lawyers. Visit www.biz2credit.com, follow on [email protected], and Facebook at www.facebook.com/biz2credit.