Big Banks Open More Lending to Small Businesses, Still Lag Industry

In recent years, many small business owners across the country have cited difficulty in obtaining financing as one of the biggest obstacles they’ve faced when it comes to growing. That has changed somewhat in recent years, but the access to credit many independent companies have is still extremely limited, especially when it comes to large traditional lenders.

In the month of April, big banks (with assets of $10 billion or more) approved 19.4 percent of small business loan requests, according to the latest data from the Biz2Credit Small Business Lending Index. That’s up from 18.8 percent in March, and is an all-time high observed in the market. However, that’s also well below the numbers being put up by competing lenders, as even with a decline in approvals from small banks (with less than $10 billion in assets), to 51.1 percent from the previous month’s 51.6 percent.

“In April, small business owners submit their tax filings, and banks use that data in making their lending decisions,” said Biz2Credit chief executive Rohit Arora, one of the nation’s leading experts in small business lending. “The economy is steadily improving, and established businesses are returning to the credit marketplace. They are able to get money from big banks that offer attractive rates. This is a very strong trend. There was a lot of pent up demand in the marketplace. Retailers are buying inventory, and restaurants are upgrading their outdoor seating in preparation for the summer. Big banks make speedier decisions on non-SBA loans, which take a long time to process. That is a major reason for the jump in approval rates by big banks.”

What about other lending sources?
When it comes to the freest lenders, alternative financial institutions approved 63.5 percent of loan applications, down a single basis point from the month before, the report said. Likewise, credit unions saw their approval ratings slump to the lowest level ever observed in the three years the index has existed, at 43.5 percent, likewise down a single basis point.

Owners who want to ensure their companies are running as efficiently as possible to better prepare them for a loan application process might want to consider the ways in which cutting small business insurance costs can help them. For instance, finding more affordable consultant insurance could end up saving them thousands annually, which can then be put toward other aspects of the company.