The economy has improved considerably over the last few years, and during that time, many small business owners across the country have reported increasing access to credit they need to help their companies grow. However, this has mostly not been true when it comes to larger lenders.
In a reversal of that trend, however, it seems that big banks and institutional lenders are starting to slowly but surely increase their approval rates for small business loan requests, according to the latest Biz2Credit Small Business Lending Index. Big banks – that is, those with $10 billion or more in assets – approved 21.3 percent of such requests in January, up marginally from the 21.1 percent observed just a month earlier. While this may not seem notable, the fact is that these lenders tend to extend loans of as much as $2 million, and sometimes more.
Likewise, institutional lenders, which typically extend loans a little smaller but still grant balances of around $1 million, are also picking up approval rates, the report said. In addition to increasing approval rates to 60.5 percent (up from 60.1 percent on a monthly basis), they’re also granting longer loan terms – up to 5 years – to small businesses specifically.
What about other banks?
Meanwhile, smaller banks are starting to cut their approval rates more or less across the board, the report said. For the third straight month, they approved fewer than half of loan requests – 49.6 percent, down very slightly from the 49.7 percent seen in December – for a number of reasons. Not least of these is the fact that people are able to apply for loans and get approval more quickly through larger lenders, and smaller institutions are also having more difficulty in competing in terms of falling interest rates.
“The result of all this is convergence in interest rates,” said Biz2Credit CEO Rohit Arora. “Big banks and institutional lenders are lowering their interest rates and competitors have to follow suit. There is no reason that small businesses should still be paying alternative lenders and cash advance companies 30-50 percent interest at a time when most rates are very low.”
Small business owners who want to position their companies for as much success as possible may want to consider the benefits of making sure all their expenses are minimized. That might include finding more affordable small business insurance coverage, including plans for liability insurance, to potentially save thousands annually.