Small Business Lending Increases for Six Straight Months

biz2credit small business lending index

Small business lending’s upward trajectory is undiminished, with Biz2Credit’s latest data revealing that small business loan approval rates at big banks reached another post-recession high last month.

According to the April 2015 Biz2Credit Small Business Lending Index, a record 21.7 percent of small business loan requests to big banks (meaning those with assets of $10 billion and more) were approved.

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Small business loans at big banks have increased for six consecutive months — and for 12 out of the past 13 months.

Biz2Credit’s small business index is based on a monthly analysis of 1,000 loan applications made by small business owners using the online lending platform.

April’s loan approval rate is up slightly from March’s 21.6 percent small business loan approval rate. April, again, marks a new high for small business loan approvals at big banks since the end of the recession.

Biz2Credit CEO Rohit Arora, who oversaw the research, said in a statement included in the April announcement:

“Now that 2014 tax returns have been filed, it is evident that the economy is doing better. I expect that loan approval rates will continue to go up in the foreseeable future. Big banks are more willing to grant bigger loans to business owners that have a track record of proven success.”

Institutional lenders also continue to grow as a source of loans for small businesses seeking them. Institutional lenders approved 61.1 percent of small business owners’ loan requests in April, up from 60.9 percent in March 2015.

Approval rates among institutional lenders have risen each month since Biz2Credit began monitoring this lending category in January 2014.

Institutional lending is becoming so popular for small businesses that cash-advance companies are feeling the pinch. Arora noted:

“Institutional lenders are becoming mainstream lenders in the small business market and are supplanting cash advance companies among non-bank sources of capital. Since advance companies charge a premium rate, the laws of economics dictate that unless you differentiate the product, eventually a lower price competitor will steal the market share. We have seen this happen to cash advance companies.”

Small banks have shown a slight improvement in terms of their approval rate for small business loans. Approvals were up one-tenth of a percent in April, rising to 49.6 percent compared to March’s 49.5 percent. Though the gap is narrowing, this category of lenders continues to deny more than half of small business loan requests. April marked the sixth consecutive month of this trend.

Still, Biz2Credit noted that April was the first month in which lending approval rates improved at small banks over the past 11 months.

Arora noted that small banks face “fierce competition” from institutional players. He added.

“Deals happen faster through electronic marketplaces, such as Biz2credit’s platform, which works against small banks in attracting more credit-worthy borrowers.”

Image: Biz2Credit

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Ed Lieber Ed Lieber is a staff writer for Small Business Trends. He is a journalist and marketing copywriter with 20 years of experience writing, editing and managing for print and digital vehicles.

4 Reactions
  1. That’s great. Does this mean that we can expect more small businesses to flourish? I guess it will depend on their management along with their products and services.

  2. Interesting development! I hope this leads to a stronger place for small businesses to grow in. Thanks for sharing this!

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