While credit restrictions still remain tight, the nation’s banks are starting to hand out small business loans more freely these days, according to business lending data company Biz2Credit. And big banks, in particular, have finally started to show more willingness to lend.
The Biz2Credit Small Business Lending Index, surveying 1,000 loan applications each month, increased in February. For big banks, those with more than $10 billion in assets, their rate of small business loan application approval rose to 15.9 percent, up from 15.3 percent in January and 11.7 percent from the previous year. That is the highest percentage in over two years for big banks.
Small banks also increased their loan approval rates, growing to 50.3 percent in February from 49.9 percent in January and 47.6 percent in February 2012. (And taking a quick glance at rates between big and small banks, small businesses should know right away where they should be seeking financing!)
A stabilizing economy and the need for greater customer retention are some of the most likely causes of the increasing approval rates.
“Smaller banks are making more and more loans through the SBA’s Small Loan Advantage Program, which range in amounts from $50,000 to $350,000 and require little collateral,” said Biz2Credit CEO Rohit Arora, in a statement. “Big banks, including Sovereign and Citizens Bank, are also increasing their approvals of loans between $50,000 and $500,000. We have even seen an uptick by giants such as TD Bank and Bank of America. Small business lending is a profitable business. I’m surprised it has taken so long for some players to get back into the game.”
Credit unions, however, are not joining the party. Their loan approval rate fell to 45.9 percent in February from 46.9 percent the month before, marking nine straight months of decline. Compared with a year ago, approvals are down 20 percent.
About Amber Nelson“Despite the surge of loan approvals by credit unions from late 2011 and early 2012, they are rejecting more than half of the funding requests from small business owners,” Arora explained. “They are lagging behind as traditional banks are becoming more aggressive in the small business lending space. Credit unions also have to make better use of technology. Their entire process is too slow.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.
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