May 25, 2016

Small Business Loan Approval Drops to 18.8 Percent at Big Banks


small business loan approval drops

Small businesses have a better bet seeking loans with small banks than with big ones. Small business loan approval drops to 18.8 percent at big banks in March. (Those are banks with assets of $10 billion or more.) The new figure represents a drop from 19.1 percent in February.

The drop in lending at bigger banks is not part of an overall slowdown in lending either. A year-over-year comparison shows lending increased by 20 percent at big banks over the last year overall. The figures come from the Biz2Credit Small Business Lending Index.

The index is based on a monthly analysis of 1000 loan applications on Biz2Credit.com.

In a prepared release issued with the monthly index report, Biz2Credit CEO Rohit Arora explains:

“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. 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.”

At the same time, small business loans at small banks are on the upswing. Loan approvals for small businesses at small banks rose from 51.4 percent to 51.6 percent over the same period.

Rohit gave one possible reason for the increased lending at these smaller institutions. That would be the increased popularity of the Small Business Administration’s Small Business Loan Program and SBA Express with these lenders. The SBA offers to guarantee up to 85 percent of these loans with no guarantee fees, which Rohit says has made them very popular.

However, another reason could be the increased flow of higher quality borrowers who are less interested in alternative lenders like merchant advance services as the economy improves. Rohit says these borrowers are increasingly shopping around for better lending rates and terms with small banks and institutional lenders like credit funds and insurance companies.

Learn more about what it takes to qualify for a small business loan by visiting the Biz2Credit tool on Small Business Trends.

Image: Biz2Credit

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Shawn Hessinger - Editor


Shawn Hessinger Shawn Hessinger is the Executive Editor for Small Business Trends. A professional journalist with more than a decade of experience in the traditional newspaper business, he has another 10 years of experience in digital media for trade publications and news sites. Shawn has served as a beat reporter, columnist, editorial writer, bureau chief and eventually managing editor with responsibility for nine weekly newspapers, the Berks Mont Newspapers.

5 Reactions

  1. I don’t know if it’s the increased government regulation or that banks are just more conservative, but the amount of documentation to get a loan from a bank is insane.

  2. I believe that we have talked about small businesses being able to get loans faster and then this? I know that regulations are getting stricter. But this can really have a great impact on the economy, you know.

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