NEW YORK–Approval rates for small business loan applications rose to another post-recession record (27.9%) at banks of $10 billion or more in assets, but hit a record low during September at credit unions, according to one just-released survey.
The results were released as part of the Biz2Credit Small Business Lending Index, which further found approval percentages also stayed slightly above 50% at small banks in September.
“Bank lending to small businesses remains strong at big banks and regional and community banks. With the recent Fed announcement that interest rates will drop, I expect business lending will continue to grow for the rest of 2019,” said Biz2Credit CEO Rohit Arora, who oversees the monthly research derived from more than 1,000 small business credit applications on his company’s online lending platform.
Small bank approvals of small business loan applications in September remained at 50.3%, according to Biz2Credit.
“Traditional bank loans and SBA loans are available at smaller banks. Because of the overall strength of the economy, greater numbers of businesses qualify for funding,” Arora explained. “Having approval rates above the 50% mark is indeed a good sign.”
Credit Union Performance
Credit unions’ approval rates fell to 39.7% in September, slipping from the 40% mark in August. The figure is a record low since Biz2Credit began analyzing business loan approval percentages in 2011, the company said.
“Other categories of lenders are all moving to digital applications. I would say that credit unions have lost their way in small business lending in today’s low interest rate environment,” said Arora. “Certainly, the member business lending cap (12.25% of their assets) does not help. Meanwhile, banks and institutional lenders are more aggressive in small business lending.”
Institutional Lenders
Institutional lenders’ approval rates again rose one-tenth of a percent to 65.9% from August’s figure of 65.8% in the Biz2Credit survey.
“Institutional lenders are a good source of small business loans and have been for the past several years,” Arora said. “They provide funding at attractive rates and terms.”
Small business loan approval rates among alternative lenders slipped one-tenth of a percent to 56.5% from 56.6% in August.
“Non-bank alternative lenders are a viable funding source for companies whose credit scores do not qualify them for traditional bank loans,” Arora said. “Even as bank lending shows growing strength, alternative lenders are valuable as a funding source to many small business owners – especially ones who have credit scores of 650 or less.”