Small Business Loan Approvals Continue to Rise

Small business loan approval rates for big banks (25.9%) continued the upswing with yet another new high in May 2018, according to the Biz2Credit Small Business Lending Index.  Big banks (assets of $10 billion-plus) are granting nearly 3-in-10 small business loan applications, according to Biz2Credit figures. The May approval percentage, up two-tenths of a percentage from April’s figure, represents a post-recession high point for big banks.

“May was another strong month for banks as they have benefitted from the overall strength of the economy,” said Biz2Credit CEO Rohit Arora.  “The unemployment rate hit an 18-year low, and average hourly pay rose 2.7% from a year prior. The U.S. economy is strong right now.”

Small business loan approval rates rose at regional and community banks. Small banks granted 49.4% of the funding requests they received in May, up two-tenths from April. It represents the highest figure for small banks since May 2015.

Institutional lenders set yet another new Index record approval percentage, 64.7%, up one-tenth of a percentage from April. These lenders (pension funds, insurance companies, and others), have become important players in small business lending.

Loan approval rates among alternative lenders remained at 56.4% from April. Approval percentage have slipped every month for almost two years, with the exception of a small uptick in November 2017.  “Even in a robust economy, there are still companies that don’t qualify for traditional small business loans because they have not been in business long or have poor credit histories,” Arora explained. “Alternative lenders fill this niche; they are willing to provide funding, albeit at higher interest rates.”

Credit unions approved 40.1% of loan applications in May, a one-tenth of a percentage drop from April, which had set a record low for the Biz2Credit Small Business Lending Index.  “Credit union lending to small business has stagnated,” Arora said. “Not much has changed for them in the past couple of years.”

Source: Biz2Credit/Bankless Times/American Banker