Big Banks Now Granting More Loans to Small Businesses

Over the past several years, many small business owners have likely encountered significant road blocks in their attempts to grow, as a result of concerns held by financial institutions. Small business lending has been severely constricted since the recession began, because banks have largely been nervous about extending that much financing to anyone. However, it seems as though those fears are largely beginning to go away.

It seems that these days, larger financial institutions in particular are having better feelings about their prospects for success when lending to small businesses, according to the latest Small Business Lending Index from Biz2Credit. Approval rates at big banks increases very slightly to 20 percent in June, up from 19.6 percent a month earlier. Meanwhile, though, smaller lenders cut their approvals even more marginally to 51.4 

“The strong return of banks in small business lending indicates three things: overall improving economy, entrepreneur confidence that they will be able to borrow for expansion and repay the loans, and the increasing ease and popularity of SBA lending,” explained Biz2Credit chief executive officer Rohit Arora, who oversaw the research. “This is a sign that the economy continues along the right path. Higher EBITDA (earnings before interest, taxes, depreciation, and amortization) that small businesses are showing in their financial documents substantially increases their chances of securing conventional financing. They are using this funding for upgrades such as building and equipment purchases. The types of purchases that small business owners are making are an excellent sign for the U.S. economy.”

What other institutions were lending?
Meanwhile, the two other major types of approvals were coming from credit unions and alternative lenders, the report said. For the latter, the approval rate was 63.2 percent, down from 63.3 percent, and the fifth straight month in which there was a drop. Meanwhile, the former saw rates improve to 43.7 percent from 43.6 percent a month earlier. Finally, approvals from institutional lenders (like insurers, credit funds, and so on) increased as well, rising to 59.2 percent from 59.1 percent.

Owners who want to best position their companies for success in terms of qualifying for lending when they need it might want to consider the ways in which they can reduce their ongoing costs. This can be done by finding more affordable small business insurance, including policies for liability insurance coverage, as a means of potentially saving thousands annually.