On Tuesday, a small business financial technology platform, Biz2Credit, released its latest Small Business Lending Index, which revealed that loan approval rates at big banks and institutional lenders have hit new highs in March 2016.
According to the report, big banks ($10 billion+ in assets) approved 23% of funding requests last month, which is up two tenths of a percent from February 2016. Small banks offered 48.7% of funding requests, down two tenths from February.
Biz2Credit CEO, Rohit Arora, commented:
“Big banks continue to loosen the spigot and are allowing more of a free flow of capital to small business. Small banks were down slightly, but I expect that 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.”
“Credit unions continue to slip as players in small business lending. This downward trend have gone on for quite a while. They simply cannot compete for quality, credit-worthy borrowers.”
Meanwhile, institutional lenders again had a slight uptick in Mach, improving to 62.8% from 62.7% in February. Arora noted:
“Institutional lenders are indeed a driving force, and I don’t see that changing anytime soon. 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.”
Loan approval rates for alternative lenders reportedly dipped to 60.7% from 60.8% in February. Arora added:
“Alternative lenders’ financial products are offered at high interest rates. With so much competition in the marketplace, borrowers are shopping for less expensive sources of capital. Speed of decision-making has long been an asset for alternative lenders. However, banks and institutional lenders are investing in technology and are also making swift decisions — and their loans come at lower rates than those of alternative lenders.”