As the nation this week honors small businesses as major drivers of economic recovery, loan approvals have been rising steadily at big banks for entrepreneurs and business owners.
Although, smaller banks and credit unions still have a much higher approval rate, 49 percent and 45 percent, respectively, loan approvals at bigger banks have moved from 10 percent in May 2012 to 17 percent last month, according to Biz2Credit.com’s monthly update.
“America’s small businesses reflect the best of who we are as a nation — daring and innovative, courageous and hopeful, always working hard and looking ahead for that next great idea,” President Obama said Friday before proclaiming June 16-22 as National Small Business Week. “They are our economy’s engine and our biggest source of new jobs.”
But without loans to start a new business, expand an existing one or finance inventories, small businesses cannot prosper.
Biz2Credit‘s Small Business Lending Index for May 2013 reports a 70 percent increase in big bank loan approvals over the past year. Moreover, loan approvals at big banks experienced increased in five of the last six months. Seems like many were considering a bank loan.
The index reports the loan approval rates of small-business financing requests at big banks ($10 billion-plus in assets), local and regional banks and non-bank lenders (credit unions, Community Development Financial Institutions (CDFI), micro lenders, and others).
Many big banks are investing in upgrades to speed up the processing of loan approvals through technological innovations.
“Although small banks continue to be aggressive players in small business lending, they are beginning to feel heat from the competition of big bank,” said Biz2Credit CEO Rohit Arora. “Small banks must continue to invest in technology to stay ahead of the game. Otherwise big banks will take over.”
Big banks often offer better rates than small banks, and that pricing is one of the many deciding variables, along with processing loans faster, Arora said.
Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business more than two years, with an average credit score above 680.
The results are based on data submitted by more than 1,000 small business owners who applied for funding on Biz2Credit’s online lending platform, which connects business borrowers with more than 1,100 lenders nationwide.
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