According to Biz2Credit’s November Small Business Lending Index, loan approval rates continue to rise. The index is a monthly analysis of a thousand loan applications on Biz2Credit’s platform for the month. Small business loan approval rates at institutional lenders continue their gradual ascent. They reached 62.4 percent in November, up from 62.2 percent in October.
Big banks ($10 billion+ in assets) and institutional lenders maintained an overall healthy approval rate. But small business loan approval rates at alternative lenders, small banks and credit unions slipped for the sixth consecutive month to 48.9 percent in November from 49 percent in October.
“We are seeing more creditworthy borrowers opting for loans at big banks and institutional lenders,” Rohit Arora, Biz2Credit CEO explained in a press release. “Small banks have suffered in the last year due to their failure to adapt to improvements in technology and other areas of operations, thus making it more difficult for small business owners to apply for loans.”
But Biz2Credit also projects increased small business lending by big banks following a decision Dec. 16 to raise interest rates for the first time in almost 10 years.
“An increase in interest rates will likely translate to higher loan approval rates,” Rohit said in an interview with the Small Business Trends. “The spreads on small business lending portfolios will be more lucrative for big banks, thus offering an incentive to approve more loan requests.”
“This actually plays into the favor of small business owners, too,” Arora added. “Although borrowers will likely be paying more for their loans, big banks, which process loans at a faster rate will be approving a higher percentage of loan requests. They generally offer the best lending rates anyway. This ultimately provides entrepreneurs with a better chance of getting the funding they need to grow their businesses.”
Biz2Credit, a leading player in small business funding, was founded in 2007 and is backed by Nexus Venture Partners. The small business financial technology platform created the small business lending index in January 2011 to track the evolution of small business lending.
The company matches borrowers to financial institutions based on each company’s unique profile. They have managed to arrange over a billion dollars in small business financing for thousands of small businesses throughout the U.S.[“source-smallbiztrends”]