NEW YORK–Small business lending at credit unions is stagnating, according to a new analysis of the market, even as it is improving at banks.
Small business loan approval rates at big banks (25.9%) hit a new high in May 2018, according to the Biz2Credit Small Business Lending Index. The monthly analysis examines more than 1,000 credit applications from small businesses on Biz2Credit.com.
Big banks (assets of $10 billion+) are granting nearly three-in-ten small business loan applications, according to Biz2Credit figures. The May approval percentage, up two-tenths of a percent from April’s figure, represents a post-recession high point for big banks.
“May was another strong month for banks as they have benefitted from the overall strength of the economy,” said Biz2Credit CEO Rohit Arora, who oversees the monthly report.
According to Biz2Credit, small business loan approval rates rose at regional and community banks, with those institutions granting 49.4% of the funding requests they received in May, up two-tenths from April. It represents the highest figure for small banks since May 2015.
‘Nearly Half the Applications’
“Small banks make a lot of SBA loans, which help small businesses expand. Many of these companies are involved in manufacturing, transportation, and construction,” Arora explained. “Small businesses involved in those sectors need capital for growth, and smaller banks are now granting nearly half of their loan applications”
Institutional lenders set yet another new Index record approval percentage, 64.7%, up one-tenth of a percent from April, Biz2Credit said. These lenders include pension funds, insurance companies, and others.
Loan approval rates among alternative lenders remained at 56.4% from April. Approval percentages have slipped every month for almost two years, with the exception of a small uptick in November 2017, Biz2Credit reported.
Credit unions, meanwhile, approved 40.1% of loan applications in May, a one-tenth of a percent drop from April, which had set a record low for the Biz2Credit Small Business Lending Index.
“Credit union lending to small business has stagnated,” Arora said. “Not much has changed for them in the past couple of years.”
To view the full Index, click here.