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.
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