NEW YORK—Small business loan approval rates at banks, $10 billion and above, dropped for the first time in seven months in October, according to the Biz2Credit Small Business Lending Index.
Credit unions, on the other hand, granted 43.5% of loan applications in October, a slight rise over the approval rate of 43.4% the previous month. However, a year-to-year comparison shows that lending approval rates at credit unions are down, Biz2Credit reports.
The monthly analysis of 1,000 loan applications on Biz2Credit.com shows small business loan approval rates at big banks dipped to 20.4% in October from 20.6% in September.
“Big banks have demonstrated their commitment to small business owners over the last year. However, institutional lenders are moving into the marketplace and attracting some high quality borrowers,” said Biz2Credit CEO Rohit Arora. “Despite the small drop in approval percentages, big bank financing of small businesses is up nearly 20% in comparison to last November when the economy was reeling from the government shutdown. With improving economic conditions, entrepreneurs have shown willingness to invest in their firms more this year than in any other since the Great Recession of 2009-11.”
The percentage of loans granted by small banks slipped for the fifth consecutive month to 50.2% from 50.3% last month. However, a year-to-year comparison shows that small business lending approval rates are still significantly higher at big banks, while remaining mostly stagnant at small banks over the past 12 months.
"Some smaller banks are paying the price for being slow to accept online applications," Arora said. "The increased competition from big banks and institutional lenders are hurting them because higher quality borrowers are going to these competitors instead of small banks."
Meanwhile, institutional lenders granted 59.7% of the funding requests they received in October, a slight increase from 59.5% in September. Approval rates by institutional lenders has increased every month since Biz2Credit began monitoring this category of lenders in January 2014.
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