NEW YORK (Press Release – October 5, 2011) – The Biz2Credit Small Business Lending Index, an analysis of 1,000 loan applications on Biz2credit.com, found that approval rates of small business financing requests by small banks and non-bank lenders increased to their highest levels of the year during September 2011. Meanwhile, approvals by large banks during September dropped slightly from their August levels.
Loan approvals by smaller banks increased to 45.1% in September, their highest rate this year and an increase from 43.8% in August.
|Month 2011||Small Bank Lending %|
Additionally, alternative lenders continued to fill the vacuum left by banks and traditional financial institutions. Credit unions, Community Development Financial Institutions (CDFI), micro lenders, and others approved 61.5% of funding requests in September, a rise from the 58% approval rate in August.
Conversely, approval rates at big banks (institutions with $10 billion+ in assets) dipped to 9.20% in September from 9.35% in August. Generally, small business loan approvals by big banks have declined nearly every month since January 2011, and approvals have not been above the 10% rate since April.
|Month 2011||Big Bank
($10B+ assets) Lending %
“The main reason for the drop in approval rates by bigger banks is the continued financial uncertainty across global capital markets, as well as the overall sluggishness in the U.S. economy,” said Rohit Arora, named “Top Entrepreneur of 2011” by Crain’s New York Business and one of the country’s top experts on small business finance. “Additionally, lack of full disbursement of the Small Business Lending Fund to community banks is adding ongoing uncertainty among smaller institutions. ”
“The stagnant economy and the fact that sentiment is turning negative are huge worries for small business owners. Combined with impeding job losses at big companies, we’re in big trouble, since small businesses account for most of the job creation in the economy,” Arora added. “There is very little growth in the U.S. economy right now.”
The Biz2Credit Small Business Lending Index also discovered that only 13% of small companies reported revenues growth of 5% or more through the first nine months of 2011. Additionally, 28% of potential small business borrowers said their sales have remained flat.
The Index also identified the Top 5 reasons why small business borrowers have not received funding:
1. More than 72% of small businesses reported declining sales in first 9 months of 2011.
2. Profitability has declined at more than 90% of small businesses over the past 2 years.
3. Bank underwriting criteria is stricter now than in 2010 when stimulus money was flowing.
4. Uncertainty among big banks is leading to increased dissatisfaction among small business owners.
5. Avoidance: small business owners believe they are unlikely to get loans and that the process takes too long.
Biz2Credit’s analysis also found that loan request amounts ranged from $25,000 to $3 million; that the average credit score was above 680, and that average-time-in-business was slightly more than two years.
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.
About the Biz2Credit Small Business Lending Index
The Biz2Credit Small Business Lending Index differs from other indices by analyzing required information (primary data) submitted by small business owners applying for financing through Biz2Credit’s online platform, which connects borrowers with more than 400 lenders nationwide.
Founded in 2007, Biz2Credit is a leading credit marketplace connecting small- and medium-sized businesses with lenders, service providers, and complimentary business tools. The company matches borrowers to financial institutions based on business’ unique profile — completed in less than five minutes — in a safe, efficient, price-transparent environment. Biz2Credit’s network consists of 1.6 million users, 400+ lenders, credit rating agencies such as D&B and Equifax, and small business service providers including CPAs and lawyers. Having secured more than $400 million in funding throughout the U.S., Biz2Credit is widely recognized as the #1 credit resource for small businesses.