NEW YORK (Press Release – November 3, 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 October 2011. Meanwhile, approvals by large banks during October rose slightly from their September levels.
Loan approvals by smaller banks increased to 46.3% in October, their highest rate this year and an increase from 45.1% in September.
|Month 2011||Small Bank Lending %|
Alternative lenders continue to fill the vacuum left by banks and traditional financial institutions. Credit unions, Community Development Financial Institutions (CDFI), micro lenders, and others approved 61.8% of funding requests in October, a rise from the 61.5% approval rate in Sept.
The approval rates at big banks (institutions with $10 billion+ in assets) rose to 9.3% in October from 9.2% in the previous month. Small business loan approvals at big banks have not risen above the 10% rate since April.
|Month 2011||Big Bank
($10B+ assets) Lending %
“Big banks continue their reluctance to lend money. The causes of this cautiousness include the continuing global financial crisis, as well as U.S. policy uncertainty and the impact of Dodd-Frank Wall Street Reform Act, which tightened regulations,” said Biz2Credit CEO 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.
“Big banks are retooling their overall direction. The ‘Occupy Wall Street’ mentality of the consumer is making an impact. For instance, deposits in credit unions are growing as people who were angered by big bank fees for the use of ATM cards decided to take their money and deposit it elsewhere. This impacts small business borrowing because now the credit unions have more money to lend, despite the 12.5% cap on credit union lending to small business owners.”
The Biz2Credit Small Business Lending Index also discovered that 17% of small companies reported revenue growth of 5% or more through the first ten months of 2011. This is good news, since it is the highest percentage revenue growth for the year. However, 25% 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 68% of small businesses reported declining sales in first 9 months of 2011(fewer and fewer borrowers are reporting declines in revenue, which is a good sign for the economy)
2. Profitability has declined at more than 86% 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.
“The economy is getting better and we can see some green shoots of recovery finally which should be encouraging for small business owners. Combined with job losses at big companies, the role of small business in job creation has become more critical,” Arora added.
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 four minutes — in a safe, efficient, price-transparent environment. Biz2Credit’s network consists of 6 million users, 450+ lenders, credit rating agencies such as D&B and Equifax, and small business service providers including CPAs and lawyers. Having secured more than $500 million in funding throughout the U.S., Biz2Credit is widely recognized as the #1 credit resource for small businesses.