Online lending platform Biz2Credit announced on Tuesday the release of its Biz2Credit Small Business Lending Index, which revealed approval rates for small business loan applications rose to another post-recession record (27.7%) at big banks ($10 billion+ in assets), while also climbing above 50% at small banks in July, Biz2Credit noted that small bank approvals of small business loan applications inched up one-tenth of a percent to 50.1% from 50% in June.
“Small business lending remains strong and is growing at big banks and at regional and community banks. Entrepreneurs who have a good credit history are having success in securing capital in 2019. More than half of the applicants who apply at small banks for funding, usually SBA loans, are getting the funding. SBA loans are certainly an important part of the mix.”
Biz2Credit’s report also revealed that institutional lenders’ approval rates rose one-tenth of a percent to 65.7% from June’s figure of 65.6%. Small business loan approval rates among alternative lenders dropped three-tenths of a percent to 56.8% from 57.1% in June. Arora further explained:
“Institutional lenders are playing an increasingly important role in small business financing. The renewed strength of bank lending to small businesses has negatively impacted alternative lenders,” Arora said. “High quality borrowers can get cheaper money at banks, but those with mediocre credit histories may still find that alternative lenders are the only ones who will fund them. Alternative lenders help business owners that the banks reject.”
The report then shared credit unions fell below the 40% mark in July for the first time since Biz2Credit began analyzing small business loan approval percentages in 2011. Currently, credit unions are approving 39.9% of loan applications, which represents a record low point. Arora added:
“Credit unions are still hurt by the Member Business Lending cap (12.25% of their assets), the aggressiveness of other categories of lenders, and by a lack of digitization,” said Arora, who oversees the Biz2Credit research. “Right now, there is not a lot of momentum in credit unions’ small business lending.”