Small Business Loan Approval Rates at Big Banks Rise in July
Ever since the Great Recession, banks have slowly increased the number of small business loans they issued. As a result, approval rates have continually reached new records, with more and more entrepreneurs finding it easier to obtain capital. Now the latest edition of the Biz2Credit Small Business Lending Index finds loan approval at big banks rates reaching yet another post-recession high.
First up, approvals at banks with more than $10 billion in assets ticked up to 27.7%. While that’s up just one-tenth of a point over June 2019, the year over year gain is an impressive 1.4 percentage points. Meanwhile approvals at smaller banks have also continued to trend upwards, reaching 50.1% in July. Although the overall approvals are far higher than at larger institutions, the increases in these rates have been more modest, climbing from 49.7% this time last year.
Elsewhere small business loan approvals at credit unions slumped. In fact the index shows approvals falling below 40% for the first time since Biz2Credit began tracking them in 2011. Over the past year, rates have dropped from 40.3% to the current 39.9%. Commenting on the decline, Biz2Credit CEO Rohit Arora said in a statement, “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. Right now, there is not a lot of momentum in credit unions’ small business lending.”
Of course it must be noted that this report arrives just after the Federal Reserve cut interest rates for the first time in a decade. This move could inspire new borrowers to seek funding, which in turn could impact the percentage of applicants gaining approval. Therefore it will be interesting to see what impact if any this could have on next month’s results.
Given the recent Fed interest rate cut and continued approval increases at banks both big and small, it seems it’s still a great time for entrepreneurs and small business owners to secure financing. As Arora noted in this month’s index, “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.” In other words, those seeking expansion for their small business should be able to find the funding they need as the longest period of expansion in U.S. history continues.