The Biz2Credit Small Business Lending Index was released this week, revealing that the approval rates for small business loan applications incrementally increased again in the month of June. Reaching 27.6% at big banks ($10 billion+ in assets) and 50% at small banks for the first time in 2019, the figure represents a record high point.
“Small business lending is thriving this year at big banks, as well as at regional and community banks. Currently, access to capital is quite good for small business owners who are looking to grow their enterprises,” said Biz2Credit CEO Rohit Arora, who oversees the monthly research derived from more than 1,000 small business credit applications on his company’s online lending platform. “In a strong economy such as this one, entrepreneurs with a solid record of payment are likely to get the financing they need for working capital and future growth needs.”
“Optimism among small business owners has surged back to historically high levels, thanks to strong hiring, investment, and sales,” said NFIB President and CEO Juanita D. Duggan. “The small business half of the economy is leading the way, taking advantage of lower taxes and fewer regulations, and reinvesting in their businesses, their employees, and the economy as a whole.”
Also in the monthly report: Institutional lenders’ approval rates climbed to 65.6%, up one-tenth of a percent from May’s figure of 65.5%. “Institutional lenders are playing an increasingly important role in small business financing,” Arora said.
Small business loan approval rates among alternative lenders dropped one-tenth of a percent to 57.0% in June, down a notch from 57.1% in May. “The resurgence of banks in small business lending has stifled alternative lenders,” Arora said. “High quality borrowers get better interest rates and terms from banks. However, alternative lenders are a viable source of funding for people who need money quickly or who have a less than stellar track record of paying back their debts. Alternative lenders often provide funding to businesses that the banks reject.”
Credit unions dropped one-tenth of a percent to a record low 40.0% loan approvals in June. “While credit unions are increasingly partnering with the SBA on small business loans, the moves are not yet making a big impact,” said Arora, who oversees the Biz2Credit research. “Credit unions are still hurt by the Member Business Lending cap, which limits their loan approvals to 12.25% of their assets, and by the fact that many of them have not digitized the small business loan application process.”