Lending To Small Businesses Jumped In September

Big banks are back in small business lending.  During a month in which the overall volume of loan applications increased by 5.6%, the Biz2Credit Small Business Lending Index revealed that approval rates jumped 30% at big banks during in September 2012.

jump up

The Index found that 14.2%.of funding requests were approved by big banks ($10B+ in assets) in September — a 30% jump from 10.9% in August 2012. The figure represents the highest approval rating percentage for big banks since the Index began in 2011.

Lenders including Citibank, Sovereign and Citizens Bank are jumping head-first back into small business lending. The economy seems to be improving slowly, and the improvement has been a factor in their willingness to lend to small businesses.

This is a good sign for the economy. Combined with surprisingly good September jobs report, the positive economic news comes just as President Obama tries to recover from his poor debate performance against Mitt Romney.

Meanwhile, small bank lending approvals dipped slightly from 47.8% in August to 47.6% in September. The loan approval rate of credit unions dropped for a fourth consecutive month in September down to 52.4% from 52.9% in August.

The September figure represented the lowest credit union approval rate since June 2011.

Alternative lenders – accounts receivable financers, merchant cash advance lenders, Community Development Financial Institutions (CDFI), micro lenders, and others – continue to make an impact on small business lending. In September, alternative lenders approval rates rose slightly to 64.6%, up from 64.5% in August. The 64.6% approval rate was the highest recorded since the Index began.

Alternative lenders offer greater flexibility, quicker approvals, and competitive lending rates than they ever have before. This type of financing is very helpful for small and mid-size businesses that encounter short-term cash flow issues. Restaurants and retailers, in particular, find this type of financing attractive as they look to the fourth quarter to be profitable than other parts of the year.

Many businesses are seeking short-term working capital to prepare for the upcoming holiday season.

Lending Up Photo via Shutterstock

1 Comment ▼

Rohit Arora Rohit Arora, CEO and Co-founder of Biz2Credit, is one of the country's leading experts in small business finance. Since its founding in 2007, Biz2Credit has arranged $800M in small business loans and has helped thousands of entrepreneurs. Rohit was named Crain's NY Business "Entrepreneur of the Year 2011."

One Reaction
  1. Thanks for that update, Rohit.

    Good news, for sure.

    Are stats for start-up lending included in the data?

    The Franchise King®