Income Tax Season Slows Small-Business Loan Applications

Income Tax Season Slows Small-Business Loan ApplicationsApproval rates for small business loans at big banks dipped, while borrowers fared about the same at smaller banks, according to Biz2Credit‘s lending index for March.
But income-tax season is a significant factor as the April 15 deadline looms. Lenders rely on tax data for processing loans that are not part of the Small Business Administration’s programs.
“Big banks rely on tax data to process non-SBA loans,” said Biz2Credit CEO Rohit Arora. “Since tax season is always a busy time of the year for CPAs who are preparing tax returns, they have less time to pull together statements for business owners seeking loans.”
That slows the loan application process, he added.
“Big banks typically process more conventional loans for larger firms than SBA Express Loans, which are more popular with companies that need less than $350,000,” Arora said.
Approval rates for small business loans at big banks ($10 billion-plus in assets) dropped to 18.8 percent in March 2014, down from 19.1 percent in February, according to the Biz2Credit Small Business Lending Index , a monthly analysis of 1,000 loan applications on Biz2Credit.com.
However, in a year-to-year comparison, lending approval rates at big banks still have increased nearly 20 percent.
Small business loan approval rates at small banks increased slightly to 51.6 percent in March 2014, up from 51.4 percent last month. Small bank lending approval rates have increased over the last three months, and four out of the last five months.
“The SBA Express and Small Business Loan Programs are becoming increasingly popular among small banks,” said Arora, who oversaw the research.
These loans are 85 percent guaranteed by the SBA, and there are no guarantee fees for the borrowers, which makes them very appealing to small banks, he said.
Meanwhile, credit unions experienced a slight increase in lending approvals. In March, approval rates at credit unions improved from 43.3 percent in February to 43.6 percent. Though, lending approval rates by credit unions are down by nearly 5 percent in a year-to-year comparison.
Alternative lenders decreased for the third consecutive month to 63.6 percent in March, from 63.9 percent in February 2014. Alternative lenders are starting to feel the squeeze from banks and institutional lenders, which are attracting higher quality borrowers who are willing to shop around.
Institutional Lenders approved 58.1 percent of the funding requests they received in March, a moderate increase from 56.6 percent in February. Lending approval rates by institutional lenders have progressively increased its loan approval rates since it was first introduced as a category by Biz2Credit in January 2014. Lenders include credit funds, insurance companies, family funds, and other yield-hungry, non-bank financial institutions that typically offer more competitively priced loan options than alternative lenders in amounts up to $1 million.

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