Approval rates at credit unions dipped to an all-time low of 43.4% in January from 43.9% in November, Biz2Credit found. Further, lending approval rates by credit unions has declined in 16 of the last 20 months and is down nearly 25% in that 20-month period.

"Increasingly, creditworthy borrowers are applying for small business loans at big banks and having them approved," said Biz2Credit CEO Rohit Arora. "Big banks, which request proof of three years of profitability, are now receiving applications from companies whose fortunes increased from 2011 to 2013."

Small business loan approvals at banks with less than $10 billion in assets reached a new benchmark of 50.9% in January, up from 48.7% in the previous month, according to Biz2Credit. 

Institutional lenders, a new category in the Biz2Credit Small Business Lending Index, approved 56.5% of the funding requests they received, the firm said. This category of lenders includes credit funds, insurance companies, family funds, and other non-bank financial institutions that typically offer loan options in amounts up to $1 million.

"Institutional investors have emerged in small business lending and offer interest rates that generally fall somewhere between the rates offered by banks – around 6% – and alternative lenders that charge up to 30-50%," Arora said. 

He added, "As more institutional lenders come into the marketplace, it provides greater amounts of long-term, stable money to the marketplace. Borrowers can get better products at attractive interest rates and terms."

In the last three to four months, Biz2Credit said it has processed more than $20 million in small business financing from institutional lenders. 

"The demand for short-term, high-interest financing will go down, and institutional lenders will fill that void," said Arora, who added he expects this category to grow as the economic conditions continue to improve.