Small Business Loan Approval Rates Surge

Small Business Loan Approval Rates

Big banks have long been accused of turning a blind eye to small businesses’ credit needs, but things are changing for the better now.

According to the Biz2Credit Small Business Lending Index, March 2016, the monthly analysis of more than 1,000 small business loan applications on, loan approval rates at big banks and institutional lenders has hit new highs.

By contrast, approval rates declined slightly for small banks, credit unions, and alternative lenders.

Key Highlights

Some of the top findings of the monthly study include the following:

  • Big banks approved 23 percent funding requests in March, up two-tenths of a percent from February 2016,
  • Institutional lenders improved their approval rates to 62.8 percent, up from 62.7 percent in February,
  • Small banks granted 48.7 percent of funding requests, down two-tenths of a percent from 48.9 percent in February,
  • Loan approval rates at alternative lenders dropped to 60.7 percent from 60.8 percent in February,
  • Credit unions granted 42 percent of loan applications, down from 42.1 percent in February.

Small Business Loan Approval Rates See Spike in Small Biz Lending

Enterprises looking to get approved for a small business loan can now expect a better response from big banks and institutional lenders.

“Big banks continue to loosen the spigot and are allowing more of a free flow of capital to small business,” says Biz2Credit CEO Rohit Arora. “International funds are getting into the marketplace. Because the yields in small business lending are attractive, increasing numbers of institutional lenders are getting into the game.”

Small Business Deals

It’s worth noting that big banks and institutional lenders have been increasing the percentage of their overall loans to small businesses for a while now.

Small Banks and Credit Unions Dip

Small business loan approval rates at small banks and credit unions, on the other hand, continued to decline.

“Credit unions continue to slip as players in small business lending,” Arora explains, “This downward trend have gone on for quite a while. They simply cannot compete for quality, credit-worthy borrowers.”

Arora however expects the situation to change. “Small banks are frequently pushing SBA loans, which mitigate their risk, but require a lot of documentation. After companies make their 2015 tax filings, look for small banks’ loan approval percentages to go up.”

As an enterprise owner, if you are wondering how you can be approved for a small business loan, you should understand what the lenders are looking for.

For its monthly index, Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business more than two years with an average credit score above 680. 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, which connects business borrowers and lenders.

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Shubhomita Bose Shubhomita Bose is a Staff Writer for Small Business Trends. She covers key studies and surveys about the small business market, along with general small business news. She draws on 8 years of experience in copywriting, marketing and communications, having worked extensively on creating content for small and medium sized enterprises.

2 Reactions
  1. Glad to see more SMBs getting funding.

  2. It is nice to hear that small business loan approvals have increased. This could signal growth for the industry which can also mean more jobs and a greater buying power.