Biz2Credit’s Latest Small Business Lending Index Confirms: Small Business Lending Thrived in January 2018

On Tuesday, Biz2Credit announced the results of its latest small business lending index, which revealed that business loan approval rates for big banks (25.3%) hit another new high last month, with big banks (assets of $10 billion+) granting more than one-quarter of the small business loan applications they receive.

Biz2Credit explained that the 25.3% approval percentage, up one-tenth of a percent from December, is yet another new benchmark for big banks. Additionally, institutional lenders remained at an Index record 64.3%, the same as in December. The lenders, pension funds, insurance companies, and others, continue to be important players in small business lending. Biz2Credit CEO Rohit Arora, who oversaw the research, reported:

“Despite some recent bumps, the economy has done well during President Trump’s first year in office, and tax cuts have also added to optimism among small business owners. With the economy showing such good signs, the number of small business owners applying for loans has risen. They are showing confidence and are willing to take risks.”

The latest research also confirmed that small business loan approval rates climbed slightly at regional and community banks. Small banks approved 49.1% of the funding requests they received in January, up slightly from December. While they have flirted with the 50 percent mark since October 2014, small banks have not reached that benchmark since then. Arora explained:

“Small banks continue to be a reliable source for SBA loans. The trend is continuing in the new year. SBA loans often are made to startups and businesses owned by entrepreneurs who might not yet have good credit ratings and don’t qualify for traditional term loans from banks.”

Meanwhile, loan approval rates among alternative lenders in January dropped one-tenth of a percent to 56.6%. Approvals have dipped slowly each month for almost two years, except for a small uptick in November 2017. Arora commented:

“Alternative lenders remain a source of funding for businesses that need money quickly or that have less than stellar credit histories. With an economy ripe for entrepreneurship, borrowers at various levels of creditworthiness continue to apply for credit. Often, companies that cannot find funding from banks are able to securing financing from alternative (non-bank) lenders.”

In regards to credit unions, Biz2Credit revealed that credit unions approved 40.3% of loan applications in January, a one-tenth of a percent drop from December. Arora added:

“While there is a continuing push to raise the lending cap limit for credit unions, they have not been successful. Meanwhile, banks, institutional lenders and alternative lenders, which have used financial technology to their advantage, have taken market share from them. I don’t see this trend changing anytime soon, unless the cap is raised and investment in technology occurs.”

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