Small Business Loan Approvals Hit New High — At Big Banks

The approval percentage for small business loan applications hit a record high of 27.3 percent at big banks ($10 billion+ in assets) in March, up one-tenth of a percent from February, according to the most recent Biz2Credit Small Business Lending Index.

“Approvals by big banks continue to climb,” said Rohit Arora, Biz2Credit’s CEO. “With strong financials from 2018, many small business owners are seeking capital for growth, and they have proven themselves to be creditworthy borrowers.”

On Mar. 20, the Federal Reserve indicated that it will not likely raise interest rates in 2019, which means that the pattern of small but continuous rate hikes has come to a halt for now. The Fed says that its target rate will remain unchanged at between 2.25 percent and 2.5 percent.

“The Federal Reserve has slowed its trend of incremental interest rate hikes, which is good news for borrowers,” said Arora. “Money is flowing to small businesses, while the cost of capital is still reasonable — especially loans from traditional banks.”

Small bank approvals of small business loan applications dropped two-tenths of a percent from 49.6 percent in February to 49.4 percent in March.

“Around this time each year, there often is a hold up because small banks — particularly lenders that process SBA loans — will wait to see the previous year’s tax filings before making a decision,” Arora explained.

“The New York District SBA Office guaranteed $82 million worth of loan guarantees last month, which is about $1 million less than what we guaranteed in March 2018,” said New York District Director Beth Goldberg. “Year-over-year, we’ve seen an uptick in the dollar value of 7(a) loans — $408 million through March 2019, compared to $402 million through the same period last year.”

She added that SBA’s fiscal year begins Oct. 1 and ends Sept. 30 of the following year.

“Administrator McMahon has been extremely supportive of small businesses all across the country in her role as the head of the SBA,” said Arora. “Her passion for the success of small businesses has been inspiring, particularly to female entrepreneurs.”

McMahon announced last month that she will resign from her post. Meanwhile the Jobs Report released on April 5, reported 196,000 new jobs were created. The Labor Department also increased its February numbers, another positive sign. Overall, the economy is still performing well, and business optimism is still high, according to the most recent NFIB Small Business Optimism Index.

Institutional lenders climbed to 65.4 percent, up a notch from 65.2 percent in February.

“Small business loan-making has proven to be profitable and relatively low risk for institutional lenders, which explains their continued growth in the marketplace,” Arora said.

Loan approval rates among alternative lenders climbed a notch from 57.2 percent in February to 57.3 percent in March, a one-tenth of a percent increase.

Credit unions approvals dipped from 40.2 percent in February to 40.1 percent of loan applications in March, tying a historic low.

“Credit unions for the most part have not kept up with technology,” added Arora. “Meanwhile, SBA lending has rebounded, big banks have asserted their presence in the marketplace and institutional lenders have been active and aggressive in striking funding deals.”

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