Summer temperatures aren't the only thing on the rise; smallbanks continue to increase the number of business loanapprovals.

According to Biz2Credit's Small Business Lending Index, the June loanapproval rate of credit unions fell to 55.8%, down from 57.6% inMay. That dip may be attributed to some credit unions reportingthat they have reached their member business lending limit, the firm noted.

Meanwhile, business loans at small banks – defined at those withless than $10 billion in assets – jumped to 47.5% in June, uptwo percentage points from 45.5% in May 2012 and up five percentagepoints higher than the 42.5.% approval rate in May 2011, accordingto Biz2Credit's monthly analysis of 1,000 loan applications.

Small banks increased their approval of SBA 7(a) Express loansin June and mid-size banks are pursuing the business lending marketaggressively, said Rohit Arora, CEO of Biz2Credit.

Big banks with more than $10 billion in assets have been underpressure to increase small business lending, Arora noted, addingthey have finally started closing deals. He said CitiBank has become much more active recently.

Alternative lenders, including community development financialinstitutions, micro lenders and merchant cash advance lenders,dropped their loan approval rate in June to 62.9% from a peak of63.2% in May.

As banks continue to approve loans, small business owners areless likely to look for other options, Arora said. Particularly,alternative funders such as factoring and merchant cash advancecompanies, which generally charge higher interest rates than banksdo, may be impacted, he pointed out.