Small-business loan approvals at big banks fell off in October, while non-bank loan approvals are gaining ground, according to a monthly survey by Biz2Credit.
Small-business loan approval rates at big banks — those with $10 billion or more in assets — dipped to 20.4 percent from September’s 20.6 percent. That marked a peak of approval rates at the biggest banks, which have climbed from a 14.3 percent approval rate a year ago. Approval rates at smaller banks have also been dropping, from a recent peak of 51.6 percent in March to 50.3 percent in September.
Meanwhile, small-business loan approvals by institutional investors continued to climb, to 59.7 percent in October from 59.5 percent in September. But non-bank approvals for merchant cash advances and factoring have drifted down all year.
Biz2Credit’s survey does not break out loan-approval rates for startups such as those providing P2P business loans.
The falloff in big-bank small-business lending may be due to the increasing rate of branch closings, according to Biz2Credit CEO Rohit Arora. “Big banks long had the advantage of a vast distribution network, the branches, which are now fading away,” Arora said. “Small business lending is becoming mainstream among institutional players, who are offering more long-term products. These lenders are providing strong competition to big banks and look to be a long-term threat for big banks in the small business lending space.”