Big banks have brought good news for small businesses.
According to the latest Biz2Credit Small Business Lending Index, a monthly analysis of loan approval rates, big banks approved 24.5 percent of funding requests, a new post-recession high in July.
Biz2Credit Lending Index July 2017
Small banks didn’t disappoint either granting almost half (48.9 percent) of the small business loan applications they received.
So what led to this sharp improvement in small business lending at banks? According to Biz2Credit CEO Rohit Arora, who oversaw the research, the markets are performing well which is increasing the appetite for small business funding.
“Overall, I would say that bank lending is stronger now than at any other time since before the Great Recession,” he said.
Small Business Loan Approval Rates at Institutional Lenders Improve
Meanwhile, approvals by institutional lenders who have seen constant growth in the small business lending marketplace, approved 63.9 percent of requests, marking a new high on the index.
“The dollar is strong, the Dow Jones reached a new high, and the U.S. economy is solid. These factors are attractive for global investors, and they see opportunity in the small business lending space,” commented Arora.
Alternative Lenders and Credit Unions Lagging
Approvals by alternative lenders, on the other hand, declined sharply. In July, approval rates declined three-tenths of a percent to 57.2 percent.
“Alternative lenders do play a key role in small business lending. They are a source of funding for borrowers who have had some financial difficulties or perhaps have little to no credit history at all,” Arora explained.
“Alternative lenders are willing to accept the greater risk that comes with less creditworthy borrowers. While there has been consolidation in this category and they are a less attractive option for small business owners, alternative lenders still play an important role in small business lending.”
As for credit unions, approval rates remained at 40.4 percent for the second consecutive month.
For the report, Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business more than two years with an average credit score above 680.[“Source-smallbiztrends”]