Biz2Credit Reports: Small Biz Loan Approval Rates Improve to New Highs at Big Banks

Loan approval rates at big banks ($10 billion+ in assets) picked up where they left off in 2016, improving to post-recession highs in January 2017, according to the most recent Biz2Credit Small Business Lending Index. This monthly report analyzed over 1,000 small business loan applications on Biz2Credit’s website. 

Biz2Credit’s report stated small business loan approval rates at big banks improved to 24% in January 2017, marking the sixth consecutive month of increases for this category of lenders. Further, loan approval rates at big banks in a year-to-year comparison are up more than a full percentage point as it slowly creeps towards the one-quarter mark of approvals. Biz2Credit CEO Rohit Arora noted:

“President Donald Trump’s recent executive orders aim to reduce financial regulation considerably, and this is good news for banks and financial institutions. Ever since his election, there has been a great sense of optimism, especially in the banking sector. Expect 2017 to be a strong year for loan originations for big banks.”

The report shared loan approval rates at small banks remained stagnant at 48.9% and are near mirror images of its 49% mark in a year-to-year comparison. While the rates did not increase, January 2017 marked the fourth consecutive month that the category of lenders avoided a decrease. Arora said:

“The dismantling of the Dodd-Frank legislature will perhaps have the biggest direct impact on small banks, which were unfairly affected when the laws were introduced. Reduced regulation will allow community lenders to approve loans more naturally without feeling unnecessary pressure from the government to jump through hoops.”

In addition, Biz2Credit revealed institutional lenders’ loan approval rates remained at 63.4%. The steady numbers ended a six-month streak of increases for this category of lenders. Arora explained: 

“The stock market reached its milestone mark of 20,000 and optimism to invest in the American finance game is a strong as it has been in quite some time,” suggested Arora. “Anticipate more global investors seeking high yield investments to become increasingly active among institutional lenders making small business loans.”

Biz2Credit noted that loan approval rates dropped at alternative lenders during the first month of 2017 as they approved 58.5% of the funding requests they received, down one-tenth of a percent in a month-to-month comparison. In December 2016, the alternative lending approval rates dropped by six-tenths of a percent. Arora noted:

 “Recent advancements in technology in mainstream lending has taken away the competitive advantage of processing loans quickly that alternative lenders once had a stronghold on. Once-thriving alternative lenders such as CAN Capital have stopped lending, as other smaller alternative lending companies are going out of business. The market has gotten to competitive for them to make enough money to stay in business. We will see more consolidation in 2017.” 

Loan approval rates at credit unions reportedly dropped to a new Index low of 40.8% in January. Arora Added:

 “Credit unions are becoming the forgotten player in the market. The loan application process has evolved considerably over the last half-decade and credit unions have failed to make the investments needed to keep them relevant.”

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