Overall, it is easier to get approved for a small business loan at banks and institutions of all sizes nowadays — at least compared to a year ago.
Small-business loan approvals at big banks — institutions with at least $10 billion in assets — and credit unions were only down slightly in June 2013.
However, approval rates nudged higher at small banks and alternative lenders.
The results from the monthly analysis of 1,000 loan applications on Biz2Credit.com are generally encouraging for small business owners.
Loan approvals at big banks dropped to 16.9 percent in June 2013 from the all-time high of 17.3 percent in May 2013 on Biz2Credit‘s lending index.
But in a year-over-year comparison, small business lending approvals at big banks are up 52 percent over the figure from June 2012.
“While approvals dropped slightly at big banks in June, overall small business lending rebounded in the first half of 2013,” said Biz2Credit CEO Rohit Arora, who oversaw the research. “Banks, both large and small, are granting loan requests at much higher rates than they did a year ago.”
Small banks gained some market share because they are more adept at offering SBA (U.S. Small Business Administration) Express loans, typically under $350,000, which are easier to finalize and come without fees.
When big banks start processing more SBA Express loans, approval percentages will likely go up.
Loan approvals at small banks climbed to 49.8 percent in June 2013 from 49.5 percent the previous month. In a year-to-year comparison, small banks approved at a higher rate last month than they did in June 2012, when the percentage was 47.5 percent.
“Small banks are granting SBA loans and continue to be strong players in small business lending,” Arora said. “Regional banks are usually more flexible and are approving a higher percentage of small business loans than big banks or credit unions, their main competition.”
Approvals at credit unions continue their decline, dropping to 44.8 percent from 45.0 percent in May 2013. This represents the lowest approval rate for credit unions since the Biz2Credit Small Business Lending Index began in 2011.
In a year-to-year comparison, credit union lending is down almost 20 percent in the twelve months between June 2012-13.
“The return of big banks to the small business credit market further threatens credit unions,” Arora said. “Lengthy processes to obtain loans at credit unions are often a large deterrent for customers, which have influenced the movement by higher credit-quality customers who are electing other lending platforms as their primary option.”