November 15, 2012

State of Alabama
Press Release: Alabama Department of Commerce

Small-Bank Business Loan Approvals Hit New High, Fueled by SBA

November 14, 2012

by Staff

Small banks are approving more small-business loans than they reject, according to a monthly analysis of 1,000 loan applications on

Small-bank lending approvals jumped from 47.6 percent in September to 50.1 percent in October, surpassing the 50 percent mark for the first time since the Great Recession took hold.

Biz2Credit’s lending index also found that 14.8 percent of funding requests in October were approved by big banks, those with $10 billion or more in assets. It is the highest approval rating percentage for big banks since Biz2Credit began the Index in 2011.

Small Business Administration loans fueled the surge in small-bank approvals.

“The big jump in small bank lending is due to the increased approvals of SBA Advantage and SBA microloans,” said Rohit Arora, Biz2Credit co-founder and CEO, who oversaw the research.  “SBA loans issued by small banks are sometimes sold in the secondary market at a premium, which provides good income.  Also since SBA loans have government guarantees, it is safer for small banks to issue them  This is very attractive to smaller banks.”

Alternative lenders –  accounts receivable financiers, merchant cash advance lenders, Community Development Financial Institutions (CDFI), micro lenders, and others – continue to make a big impact on small business lending.

In September, alternative lenders approval rates rose slightly to 64.7 percent, up from 64.6% in September.  The figure for alternative lenders was the highest recorded since the Biz2Credit Small Business Lending Index began.

The loan approval rate of credit unions dropped for a fifth consecutive month in October, down to 49.2 percent from 52.4 percent in September.  The figure represented the lowest credit union approval rate since June 2011.

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