Approval rates for small business loan applications reached a record high of 27.5 percent at big banks ($10 billion+ in assets) in April, up one-tenth of a percent from march, while approval percentage at small banks jumped four-tenths of a percent to 49.8 percent according to the Biz2Credit (New York, N.Y.) Small Business Lending Index.
“Approvals by banks of all sizes continue to climb. The economy is still strong, and small business optimism is high,” said Rohit Arora, Biz2Credit’s CEO. “Small business lending is as strong as it has ever been in the 21st century’s post-recession era.”
Small bank approvals of small business loan applications climbed from 49.4 percent in March to 49.8 percent last month.
“After February, the SBA wants the previous year’s tax returns. Once taxes are filed, SBA lending, which is particularly important to small banks, picks up,” Arora explained. “The backlog is over, and small banks are lending.”
Meanwhile, in the Jobs Report release on May 5, the Labor Department reported that employment increased by 263,000 in April, while the unemployment rate declined to 3.6 percent. The industries with notable job gains were professional and business services, construction, health care and social assistance. The NFIB Small Business Optimism Index increased in April to a historically strong level. This is an indication that small businesses continue to power the economy after being briefly shaken by January’s government shutdown, according to the NFIB.
Institutional lenders slipped a notch to 65.3 percent, up from 65.4 percent in March.
“Even with a little hiccup, institutional lenders are approving nearly two-thirds of the funding requests they receive,” Arora said.
Loan approval rates among alternative lenders dropped one-tenth of a percent to 57.2 percent in April, down from 57.3 percent in March.
“Alternative lenders have had a lot of losses, and there has been a bit of pull-back from them,” said Arora. “Banks are lending, and they can offer more attractive rates and terms than alternative lenders can. The banks are getting their applications from higher quality borrowers.”
Credit unions remained at a record low 40.1 percent of loan applications last month.
“Credit unions are beginning to look for fintech partners to help them upgrade their technology,” added Arora. “They have to respond to the marketplace, and millennials simply won’t take the time to walk in and become a member in order to fill out a loan application. Digitizing the process will help.”