Biz2Credit Small Business Lending Index for April 2012 Reports Drop in Loan Approval Rates at Big Banks, Small Banks and Credit Unions
New York, NY (PRWEB) May 08, 2012
The Biz2Credit Small Business Lending Index, an analysis of 1,000 loan applications on Biz2credit.com, found that loan approvals by big banks dropped from 10.9% in March to 10.6% in April and from the 11.6% approval rate last March. Additionally, small bank lending fell from 47.6% in March to 45.9% in April 2012.
Loan approvals made by credit unions decreased by 0.5% to 46.6% at a time when they are making a push to increase the lending limit to 27.5% of their assets. Alternate lenders remained flat as lower interest rate products have increasingly been introduced into the marketplace.
Another sign of the slowing economy is that the overall demand for small business loans in April was down by 5.4% , slipping for the first time in a year. Further, the 12-month window for SBA's enhanced 90% loan guarantees concluded, which slowed SBA lending activity reported by banks that make SBA-backed loans. Additionally, the guarantee fee (usually 1-3 % of the loan amount) was no longer waived, which increases the cost of taking out a loan.
"The 90% guarantee fee in place for loan approvals granted between Sept 2010 to March 2011 were valid for 12 months. April 2012 was the first month of 75% guarantees combined with assessment of the 1-3% fee, explained Rohit Arora, CEO of Biz2Credit, who oversaw the research. "This played a big part in the drop in loan demand and the reduced willingness of banks to grant funding requests."
"The disappointing April jobs report in which only 115,000 new jobs were created, and when the expectation was much higher, is an indication that the economy is slowing down. High oil prices as well as the European crisis intensifying have combined to cause both borrowers and lenders to proceed with caution," Arora added. " The flow of capital may be slowing, which is a cause of concern."
Of all the categories of small business lenders, credit unions and alternative lenders (accounts receivable financers, merchant cash advance lenders, Community Development Financial Institutions (CDFI), micro lenders, and others) approve more than 50% of loan requests. Small bank lending dropped to its lowest level since September 2011. Big banks, still tight in their loan parameters, reject almost 9 out of 10 small business loan requests.
Biz2Credit's analysis also found that loan request amounts ranged from $25,000 to $3 million; that the average credit score was above 680, and that average-time-in-business was slightly more than two years.
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.
About the Biz2Credit Small Business Lending Index
The Biz2Credit Small Business Lending Index differs from other indices by analyzing required information (primary data) submitted by small business owners applying for financing through Biz2Credit’s online platform, which connects borrowers with more than 1,100 lenders nationwide.
Founded in 2007, Biz2Credit is a leading credit marketplace connecting small- and medium-sized businesses with lenders, service providers, and complementary business tools. The company matches borrowers to financial institutions based on business’ unique profile -- completed in less than four minutes -- in a safe, efficient, price-transparent environment. Biz2Credit’s network consists of 1.6 million users, 1,100+ lenders, credit rating agencies such as D&B and Equifax, and small business service providers including CPAs and lawyers. Having secured more than $550 million in funding throughout the U.S., Biz2Credit is widely recognized as the #1 online credit resource for small businesses.