Data from the Biz2Credit Small Business Lending Index showed that small business loan approvals at major banks rose to 17.4 percent in November—a 21.7 percent increase from October.
“Big banks have begun to feel the pressure to lend more money with the Dodd-Frank reform bill nearing, and we should expect to see more changes accordingly in the next year,” Biz2Credit CEO Rohit Arora, who oversaw the research, said.
Small business loan approvals at small banks rose by more than 12 percent to reach 49.7 percent in November. Approval rates at banks have returned to pre-government shutdown levels as the IRS and Small Business Administration catch up on the backlog of loan applications.
“The refinancing boom at big banks has waned and the distribution strength will soon fade as branch networks are losing money so big banks must begin to focus on improvements in other areas such as lagging technology,” Arora said. “It’s still puzzling why many banks and credit unions still do not offer online small business applications to streamline the process. This would benefit both the financial institutions and the loan applicants.”
Credit unions also saw a slight increase in approval rates, from 43.4 percent in October to 44.5 percent in November, but approval rates for the institutions are still down by nearly 10 percent year-over-year. Alternative lenders saw approval rates fall slightly from 67.3 percent to 67.2 percent.
“The popularity of alternative lenders continues to increase as the desperation for small business owners to acquire capital becomes more urgent and because their interest rates have dropped considerably,” Arora said. “The vast majority of alternative lenders are no longer like a ‘legalized loan shark,’ as was frequently the case a few years ago. New players continue to enter the small business lending market.”
Arora said funding approval rates are likely to climb in December and into 2014 under the pressure of Dodd-Frank reforms that are set to take effect in coming months.