NEW YORK—A new report indicates that big banks continue to put their foot on the small business lending gas pedal while credit unions appear to be stalling.
According to the Biz2Credit Small Business Lending Index, a monthly analysis of 1,000 loan applications on Biz2Credit.com, small business loan approval rates by big banks and institutional lenders reached post-recession highs in December 2014.
Banks above $10 billion in assets approved 21.1% of small business loan requests in December, up from 20.8% in November, marking back-to-back months of increases. Further, a year-to-year comparison shows that lending approval rates at big banks are up nearly 20%.
“The higher percentage of loan approvals at big banks is good news for small business owners. However, big banks typically seek to grant loans of $500,000 or more and much prefer loans in excess of $2 million,” said Biz2Credit CEO Rohit Arora, who oversaw the research. “Many startups and young companies do not need that much money. Thus, big banks may not the answer for these types of borrowers.”
Meanwhile, credit unions granted 43.3% of loan applications in December, a slight drop in the approval rate of 43.4% over the previous month. Biz2Credit noted that CUs “continue to struggle making a bigger presence in the small business finance marketplace.”
Small banks moved backward, as well, with their lending approval rates dropping for the seventh month in a row, approving 49.7% of loan requests from small business owners in December. The report shows that percentage is slightly below November’s mark of 49.8%. “Despite the steady drops in lending approval rates at small banks, a year-to-year comparison shows that these loan approval rates are nearly identical to last year’s numbers,” Biz2Credit reported.
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