Last month, big banks approved small business loans at their highest rate in more than two years, according to one credit index.
Biz2Credit calculates its monthly Small Business Lending Index using 1,000 loan applications made over its online lending platform. The index defines large banks as those with $10 billion or more in assets. The index found that big bank approval rates were the highest since Biz2Credit began compiling the index in January 2011.
There are a number of possible reasons for the higher approval rates. Experts point to the economy stabilizing over the last 18 months as well as the Small Business Administration offering premiums and incentives to big banks that work with small businesses.
“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, who oversaw the research. “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.”
The index also reports that credit unions loan approval rates fell for the ninth straight month. One reason for this decline is as banks approve more loans, credit unions are receiving more loans from applicants with less than desirable credit ratings.