Summer temperatures aren’t the only thing on the rise; small banks continue to increase the number of business loan approvals.
According to Biz2Credit’s Small Business Lending Index, the June loan approval rate of credit unions fell to 55.8%, down from 57.6% in May. That dip may be attributed to some credit unions reporting that they have reached their member business lending limit, the firm noted.
Meanwhile, business loans at small banks – defined at those with less than $10 billion in assets – jumped to 47.5% in June, up two percentage points from 45.5% in May 2012 and up five percentage points higher than the 42.5.% approval rate in May 2011, according to Biz2Credit’s monthly analysis of 1,000 loan applications.
Small banks increased their approval of SBA 7(a) Express loans in June and mid-size banks are pursuing the business lending market aggressively, said Rohit Arora, CEO of Biz2Credit.
Big banks with more than $10 billion in assets have been under pressure to increase small business lending, Arora noted, adding they have finally started closing deals. He said CitiBank has become much more active recently.
Alternative lenders, including community development financial institutions, micro lenders and merchant cash advance lenders, dropped their loan approval rate in June to 62.9% from a peak of 63.2% in May.
As banks continue to approve loans, small business owners are less likely to look for other options, Arora said. Particularly, alternative funders such as factoring and merchant cash advance companies, which generally charge higher interest rates than banks do, may be impacted, he pointed out.