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Small Business Financing at Big Banks and at Institutional
Investors Finishes Strong in Landmark Year, According to
December 2014 Biz2Credit Small Business Lending
IndexTM
Loan Approval Rates Drop for Seventh Consecutive Month at Small Banks, Alternative
Lenders and Credit Unions Also Stalled as 2014 Ended
Small business loan approval rates by big banks and institutional lenders reached post-recession
highs in December 2014, according to the Biz2Credit Small Business Lending Index, a monthly
analysis of 1,000 loan applications on Biz2Credit.com.
Big banks ($10 billion+ in assets) approved 21.1% of small business loan requests in December,
which is up from 20.8% in November and marks back-to-back months of increases. Further, a yearto-year comparison shows that lending approval rates at big banks are up nearly 20 percent.
"The higher percentage of loan approvals at big banks is good news for small business owners.
However, big banks typically seek to grant loans of $500,000 or more and often prefer loans in
excess of $2 million," said Biz2Credit CEO Rohit Arora, who oversaw the research. "Many startups
and young companies do not need that much money. Thus, big banks may not be the answer for
these types of borrowers."
Meanwhile, institutional lenders granted 60.1% of funding requests by small business owners in
December, an increase from 59.9% in November. Approval rates by institutional lenders have
increased each month since Biz2Credit began monitoring this category of lenders in January 2014.
"Institutional lenders continue to be prominent factors in the small business finance game," said
Arora. "They are offering a wider variety of financial products that are more attractive to borrowers,
including longer terms and lower interest rates than other non-bank alternative lenders."
"Credit-worthy borrowers are increasingly opting to apply for loans at institutional lenders because of
the simplicity of getting financing from these lenders and more attractive terms that are offered,"
explained Arora, one of the nation's leading experts in small business finance. "They are also
approaching big banks, which enjoy better brand names and are getting the highest quality
borrowers coming to them."
For the second consecutive month, small banks are denying more than half of their loan requests.
Further, lending approval rates by small banks dropped for the seventh month in a row as they
approved 49.7% of loan requests from small business owners in December, which is slightly below
November's mark of 49.8%. Despite the steady drops in lending approval rates at small banks, a
year-to-year comparison shows that these loan approval rates are nearly identical to last year's
numbers.
Approval rates at alternative lenders -- merchant cash advance companies, factors, and other nonbank institutions -- slipped for the 12th straight month to 61.8% in December, from 62% in
November.
"Small business owners' financials have improved. Their performance is better and they are
increasing their business credit scores. As a result they are not as desperate for money as they were
during the recession when many alternative lenders could charge very high interest rates," added
Arora.
Credit unions granted 43.3% of loan applications in December, a slight drop in the approval rate of
43.4% over the previous month as they continue to struggle making a bigger presence in the small
business finance marketplace.
Alternative
Lenders
Approval %
Institutional
Investors
Approval %
Month
Big
Bank
Approval %
Small Bank
Approval %
Credit Union
Approval %
Dec. 2014
21.10%
49.70%
43.30%
61.80%
60.10%
Nov. 2014
20.80%
49.80%
43.40%
62.00%
59.90%
Oct. 2014
20.40%
50.20%
43.50%
62.10%
59.70%
Sep. 2014
20.60%
50.30%
43.40%
62.60%
59.50%
Aug. 2014
20.40%
50.60%
43.40%
62.70%
59.40%
July 2014
20.10%
50.90%
43.50%
62.90%
59.30%
June. 2014
20.00%
51.40%
43.70%
63.20%
59.20%
May. 2014
19.60%
51.60%
43.60%
63.30%
59.10%
Apr. 2014
19.40%
51.10%
43.50%
63.50%
58.30%
Mar. 2014
18.80%
51.60%
43.60%
63.60%
58.10%
Feb. 2014
19.10%
51.40%
43.30%
63.90%
56.60%
Jan. 2014
17.80%
50.90%
43.40%
64.10%
56.50%
Dec. 2013
17.60%
48.70%
43.90%
67.30%
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About the Biz2Credit Small Business Lending IndexTM
Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business
more than two years with an average credit score above 680. Unlike other surveys, the results are
based on primary data submitted by more than 1,000 small business owners who applied for funding
on Biz2Credit's online lending platform, which connects business borrowers and lenders.