Small Business Loans Continue to Sink at Big Banks as Approvals Drop, But Smaller Banks and Alternative Providers Fill the Gap

Biz2Credit’s periodic small business lending index is sharing once again that big banks are denying loan approvals for SMEs.

At the same time, smaller banks and alternative lenders are stepping in to fill the gap and provide much-needed growth capital.

According to the index, big banks – or institutions with over $10 billion in assets, saw loan approvals decline from 13% to 13.1% from September to October. While the percentage may seem small, there are more smaller firms in the US than big ones, representing much of the economy.

The approval rates of institutional investors rose from 27.5% in September to 27.6% in October, while alternative lenders increased from 29.7% in September to 29.9% in October, according to the index.

As for smaller banks, approvals have been increasing since June 2023, moving from 19.3% in September to 19.5% in October.

Credit Union loan approval dropped from 19.9% in September to 19.8% in October.

Big banks may be preparing for Basel III rules, or alternatively, they are making so much money elsewhere – risky SME loans may not hold much appeal.

For borrowers, the message is clear. Skip the big banks and go elsewhere.

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