On Tuesday, Biz2Credit released its latest small business lending index, which reportedly revealed that loan approval rates at big banks and institutional lenders continued their recent surge and improved to new highs last month (November 2016). The monthly analysis was conducted on over 1,000 small business loan applications through Biz2Credit’s platform.
According to the report, small business loan approval rates at big banks improved to 23.7% during the month of November, which was up by two-tenths of a percent from October 2016. This marked the eighth time in the past nine months that lending approval rates increased at big banks. In addition to the increase, approval percentages at small banks improved 48.8%, up one-tenth of a percent from October. Rohit Arora, CEO and co-founder of Biz2Credit, stated:
“Banks have invested in technology the last year is paying its dividends. Advances in analytics enable them to approve a higher percentage of loans while lowering loan default rates,” said , who oversaw the research. “When the Fed decides to increase the interest rates, I expect that loan approval rates will continue to improve gradually as it will become more profitable for them to lend.”
Biz2Credit also reported that for the fifth consecutive month, loan approval rates at institutional lenders improved, climbing to a new Index high of 63.3% in November 2016. Arora revealed:
“Institutional lenders have been a big story in marketplace lending in 2016. They are here to stay. Right now, they are processing loans faster and more efficiently than other categories of lenders. Capital is flowing from many foreign investors due to the high yields because of uncertainty in some international markets. I expect more global investors to be involved in U.S. small business lending during 2017.”
Arora then shared he believes the election of Donald Trump will positively impact lending markets. The President-elect has pledged to repeal Dodd-Frank, which brought of bevy of regulations to the banking sector since it was signed into law. He also explained if Dodd-Frank is scaled back, small banks could be the biggest beneficiaries.
“CAN Capital, one of the largest and oldest players in alternative lending, has stopped lending money and replaced CEO Dan DeMeo. Alternative lenders have lost favor because of the high rates they charge. Meanwhile, they lost much of their competitive advantage of the speed of their decision-making as other types of lenders continue to invest in technology to expedite the loan approval process.”
Arora went on to add that koan approval rates at credit unions dropped in November to yet another Index low of 41.1%:
“Sadly, credit unions are becoming an afterthought for borrowers in small business loans. They aren’t keeping up with the times as other categories of lenders continue to dominate the market share in small business lending.”