In the past several years, it has been extremely difficult for many small business owners to obtain approval from lenders when it comes to loans that could help to keep their companies afloat. However, things have gotten a little bit easier in recent months, and that has been reflected especially in lending from small and large banks.
Approval rates at large banks in particular have surged in the last year, according to the latest Biz2Credit Small Business Lending Index. In all, these hit 17.8 percent in the first month of the new year, up from both the 17.6 percent seen a month earlier, and the 15.3 percent observed in the same period one year prior. That represents an expansion in lending by these institutions of more than 15 percent overall on an annual basis.
Similarly, when it comes to actually having the best chance of obtaining approval from a financial institution, it seems small banks are still the way for independent companies to go, the report said. In all, these lenders approved 50.9 percent of all small business loan applications they received, up from 48.7 percent in December, and 49.9 percent a year earlier. That’s just a 2 percent improvement year-over-year.
“Increasingly, creditworthy borrowers are applying for small business loans at big banks and having them approved,” said Biz2Credit chief executive officer Rohit Arora. “Big banks, which request proof of three years of profitability, are now receiving applications from companies whose fortunes increased from 2011- 2013. SBA lending has picked up considerably over the last month. The increase in popularity over the last month in SBA lending accounts for the rise in approval rates at small banks, which rely heavily on the SBA Express program (loans less than $350,000) and SBA 7(a) program (loans between $350,000 – $5 million).”
Other lenders more mixed
Meanwhile, approval rates at credit unions actually declined both monthly and annually, dropping to 43.4 percent from 43.9 percent and 46.9 percent, respectively, the report said. This was also partly true of alternative lenders, as 64.1 percent signed off on such requests in January, down from 67.3 percent the previous month, but still higher than 63.7 percent a year earlier.
Owners looking to shore up their finances may want to consider more than just obtaining new loans, such as examining their expenses to determine whether they’re paying more than is necessary for their small business insurance. Cutting costs for liability insurance, for instance, could help them save thousands per year.