Biz2Credit Reports: Loan Approval Rates Drop at Banks & Alternative Lenders in May 2017

On Tuesday, Biz2Credit released its latest Small Business Lending Index that revealed loan approval rates at big banks, small banks, alternative lenders, and credit unions took a slight dip in May 2017.

According to the lending platform, small business loan approval rates at big banks fell two-tenths of a percent from April’s 24.3% figure to 24.1% the next month. This drop reportedly comes just after approval rates at big banks climbed for most of the year. Speaking about the latest index findings, Biz2Credit CEO, Rohit Arora, stated:

“Despite the overall strength of the U.S. economy, there are concerns about recent acts of terror, perceived instability of President Trump’s administration, and his erratic behavior. Trump’s promised tax cuts have not happened yet, and we don’t really know if his overhaul of Obamacare will help small business owners. These factors cause anxiety in credit marketplaces. We’ve seen it on our platform as the volume of loan applications slowed in May.”

Biz2Credit also revealed that loan approval rates at small banks dropped in May to 48.8%, down from April’s 49% figure. It was noted that small banks have flirted with the 50% mark, but have not reached it since October 2014. Arora explained:

“Small banks are approving almost half of their business funding requests. The demand for SBA-backed loans in the marketplace remains strong. As SBA loans are popular with both borrowers and lenders.”

The lender then shared that institutional lenders’ loan approval rates in May improved slightly to 63.8%, another new high on Biz2Credit’s index. It marked the fifth time in the past six months that this category of lenders showed an increase in funding approval percentages. Arora commented:

“The U.S. dollar remains strong against the euro, the British pound, and other international currencies. For this reason, foreign investors continue to look for high yields from America’s small business credit marketplace. There is no denying, however, that global investors have some anxiety about President Trump’s performance in office thus far.”

Loan approval rates reportedly dropped at alternative lenders by two-tenths of a percent in May, as non-bank lenders granted 57.7% of the funding requests. This marks nearly one year of consecutive decreases for this category of lenders. Arora then said:

“As banks and institutional investors close deals at levels that are still quite high, alternative lending has lost its attractiveness. Alternative lenders charge much higher rates, and this makes them lenders of last resort for many borrowers. Small business owners are able to secure financing at lower costs from other types of lenders fairly quickly. This hurts alternative lenders.”

Biz2Credit went on to note that loan approval rates at credit unions dropped one-tenth of a percent in May to 40.5%, another new low for this category of funders on the index. Arora added:

 “Credit unions continue to trend downwards in their approval percentages. Their volume is low, and they are becoming less relevant in small business lending. I don’t see this changing anytime soon.”

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