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Big Banks, Credit Unions Approve More Small Business Loans

Big Banks, Credit Unions Approve More Small Business Loans

Photograph by Scott Eells/Bloomberg

Nearly five years after the financial crisis made it more difficult for small businesses to get bank loans, large lenders are loosening credit standards and allocating more capital to small business lending, according to research published today by Biz2Credit, which matches borrowers with lenders.

The company compiles a monthly index that tracks approval rates for small business loans at various types of lenders. Business owners can apply for loans through Biz2Credit’s website, which makes the company’s survey of more than 1,000 loan applications a window on the small business credit market.

Banks with $10 billion or more in assets approved 17.4 percent of loan applications in July, up from 11.3 percent in July 2012. It’s the highest rate since Biz2Credit began compiling its index in 2011. Large banks approved 16.9 percent of loans in June, according to the index.

Approval rates will continue to rise as more small businesses no longer need to include Great Recession-era tax returns on their loan applications, Biz2Credit Chief Executive Officer Rohit Arora says: “Banks historically will look at two years of tax data: This is the first year where 2009 and 2010 are going out the window. In 2011, businesses began showing an upward trend. Even if it was only a small amount, it makes lenders more confident.”

July’s survey also showed that approval rates at credit unions rose for the first time in 13 months. Banks with less than $10 billion in assets approved 49.4 percent of loans in July, down slightly from the month before. Approval rates at alternative lenders slipped to 63.2 percent, from 63.4 percent the month before.

In June, Credit Union National Association chief economist Bill Hampel questioned whether Biz2Credit’s research reflected the true state of credit union lending, pointing to research showing that credit unions made $3.9 billion in business loans in the first quarter of 2013, up from $3.1 billion in the same quarter of the previous year.

Clark is a reporter for Bloomberg Businessweek.

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