These days, with the economy improving and many small business owners feeling better about their prospects for growth going forward, a number of companies might want to expand through the use of small business loans. Luckily for them, it seems many banks are now willing to accommodate their requests.
On a year-over-year basis, small business loan approvals from larger lenders rose by more than 50 percent in April, and the numbers at that time were also up slightly from March, rising to 16.8 percent, according to the latest Small Business Lending Index from Biz2Credit. The current levels of approval from big banks is the highest ever observed by the company.
However, smaller lenders are also getting into the game, increasing approval rates for the fifth month in a row, the report said. These local financial institutions were far more likely to extend small business loans to owners, with approval rates climbing to the all-time high of 50.9 percent, up one basis point from March, but 10 percent from the same month a year prior.
"Small banks continue to be an aggressive player in small business lending, but must maintain focus on advancements in technology to remain competitive in lending or the big banks will take over," said Biz2Credit CEO Rohit Arora, one of the nation's leading experts in small business finance. "Big banks possess the element of brand recognition and can generally offer better rates than small banks, so it is essential small banks offer an advantage and continue to process loans quicker."
Finally, credit unions actually cut the amount of small business loan approvals for which they signed off in April, the report said. Rates fell to an all-time low of 45.2 percent from March's 45.5 percent, continuing a trend of declining approvals for these institutions. Moreover, it seems unlikely that the move toward fewer small business loan approvals will reverse itself.
Small business owners looking to expand their companies may also want to consider the insurance implications such a move would have. Many small business insurance policies are increasing in cost, and expansion could leave them needing to pay far more for coverage including workers' compensation – if they were to increase hiring – or general liability insurance. As a consequence, owners should do all they can to make sure they are adequately prepared for such a move.