Small Business Loans Hit Record High for Third Consecutive Month



august 2014 lending index

Small businesses loan approvals saw record highs for a third consecutive month in August.

Small business loans at bigger banks were approved 20.4 percent of the time last month. That’s up from 20.1 percent in July. Data comes from the August 2014 Biz2Credit Small Business Lending Index.

The rate in August was the highest since the Great Recession and is a sign that bigger banks are becoming more willing to invest in small businesses. In fact, over the course of the last year, that approval rate has increased 15 percent, the research shows. In a release further detailing the results of the latest report, Biz2Credit CEO Rohit Arora explains:

“Big banks are utilizing their brand recognition and their investment in technology that makes processing of non-SBA loans more swift and efficient. As the economy has improved, and the optimism of small business owners seems to be strong, entrepreneurs are willing to invest in their growth potential. Big banks are aggressively pursuing small business loan-making and are attracting higher quality customers from competitors.”

Biz2Credit analyzes 1,000 small business loan applications filed each month at Biz2Credit.com to determine this rate. The research labels a big bank as one that has more than $10 billion in assets.

Conversely, that data also shows that small businesses were less successful in August than they had the previous month when applying for loans at small banks. The rate of approvals for small businesses from those institutions dropped to 50.6 percent in August from 50.9 in July.

Institutional lenders continue to give loans to small businesses at a steady rate. Last month, the approval rate was 59.4 percent, up slightly from 59.3 in July.

Arora says that institutional lenders – like insurance companies and credit funds – can offer a longer-term product (in this case, a loan) at a reasonable price. He says:

“Institutional investors are quickly becoming important players in small business lending, and they are taking market share from alternative lenders. Meanwhile, the interest rates charged by non-bank lenders continue to drop. This benefits entrepreneurs in search of capital.”

Biz2Credit’s data supports that statement, showing the approval rates for small business loans from alternative lenders like cash advance companies dropped to 62.7 percent last month. That’s the seventh consecutive month that rate has dropped, according to the report.

Images:Shutterstock,  Biz2Credit

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Joshua Sophy Joshua Sophy is the Assistant Editor for Small Business Trends and the Head of Content Partnerships. A journalist with 20 years of experience in traditional and online media, Joshua got his start in the rough and tumble newspaper business of Pennsylvania's coal region. He is a member of the Society of Professional Journalists and was a beat reporter covering daily news. He eventually founded his own local newspaper, the Pottsville Free Press, covering his hometown. Joshua supervises the day-to-day operations of Small Business Trends' busy editorial department including the editorial calendar and outgoing assignments.

4 Reactions
  1. I guess it can mean two things: more and more small businesses are being created which can be a good thing or so many businesses need help which is bad news. It is up to you on what you want to believe.

    • If big banks approval rates for small business loans are increasing, that means it must be good. Unlike before, big banks are processing the loan more swiftly; the economy is only getting better and better with more small companies coming up front. They are not going to have any financial problems, it seems so!

  2. Confused in Aurora

    Can we come to agreement on “small business?” Small Business Administration contracting guidelines allow ITT Space Systems, Carestream Health, and Harris Corp to do contracting work because of their small business status (source: http://www.democratandchronicle.com/story/money/business/2013/10/19/big-firms-winning-small-business-contracts/3070625/). At the same time, SBA 2012 Lending data combines both microbusiness and macrobusiness data, two largest sectors. Micro loans are between $0 and $100,000 and macro between $100,000 and $1,000,000. Average micro loan $13,000.

    SBA data shows that from 2007, small business loans, see above, were decreasing on an increasing bases and forecasts that trend throughout 2014, however, small business loans are increasing in all other categories throughout 2013, except for micro and macro.

    Micro to me are all those unemployed people in the construction trades and personal services that created their own businesses because of the economic woes of early 2000. When I walk down Main Street I know them to be small retailers, barbers, handymen, HVAC, and the like.

    Know of a person that had $10,000,000 in real property, wholesale business which provided in excess of $450,000 net profit, and rental income $1,000,000 and a line of credit of $300,000 that was called and could not secure a loan to save his business.

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