Approval Rate of Small Business Loans
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Last July 2014, small business loan approval rates at major banks increased to 20.1% according to the Biz2Credit Small Business Lending Index. Big banks became once again the primary source of working capital for small business owners with good credit scores. There has been over a 15% increase in lending approval rates per year. And above all, small businesses have risen up their game over the past year to make a demand for sales that makes them attractive for lenders. This gives a good sign that the economy is progressing when even small banks are approving small business loans.
However, after a pleasant run for most of 2014, small business loans which are taken from big banks dropped last October. It happened for the first time in seven months. Approval rates began to drop from 20.6% in September to 20.4% in October according to the BIZ2Credit Small Business Lending Index.
This new data presents a relatively slight draw back for small business owners who wish to get a loan. According to Biz2Credit CEO Rohit Arora, “The October rate is still 20% higher than it was in November 2013 and despite the small drop in approval percentages, big bank financing of small businesses is up nearly 20% in comparison to last November when the economy was reeling from the government shutdown. With improving economic conditions, entrepreneurs have shown willingness to invest in their firms more this year than in any other since the Great Recession of 2009-11.”
Arora adds that, “Small lenders are lagging in their pursuit of small businesses. Big banks are attracting small businesses and making it easier to apply for a loan. The loan approval rate for small businesses through credit unions went up slightly last month, from 43.4% in September to 43.5% in October.”
As major banks started courting small business owners seeking working capital to expand their business, institutional lenders are also giving out a hand to small businesses after looking the other way during the recession.