Right on schedule, Biz2Credit has published its latest Small Business Lending Index. Its May 2015 analysis of the state of SME finance has suggested a bit of a slump in recent months for alternative lenders and a brighter position for traditional banks.
Biz2Credit’s May 2015 insight into the market, published Tuesday (June 9), offers the strongest evidence yet that big banks are improving their relationships with small business borrowers. According to the Index, SME approval rates of big banks reached new highs last month as more small business loan applications were approved.
In its monthly survey of 1,000 loan applications, Biz2Credit found that 21.9 percent of small business loan applications were approved by big banks last month, up from 21.7 percent the month prior. The findings mark the seventh month in a row that big bank SME lending approval rates increased. Year over year, the findings represent a 1 percent increase in SME loan approval rates, researchers said.
According to Biz2Credit CEO Rohit Arora, low interest rates continue to sway SME borrowers away from alternative lenders toward more traditional ones. Affordable rates have led to a new high among big bank SME lending. “In fact,” Arora said in a statement, “big banks are granting a higher percentage of small business loan requests than at any time since the recession.”
The Biz2Credit Index revealed another milestone for the state of SME lending last month: For the first time since the Index began, the percentage of institutional lender approval rates surpassed that of alternative lenders. Institutional lenders approved 61.3 percent of SME loan requests in May, up from 61.1 percent the month prior.
Alternative lenders saw a new low in SME loan approval rates, which hit 61 percent in May, down from 61.1 percent in April. Biz2Credit has found a decline in alternative lending approval rates every month since January 2014, reports said.
“With the relatively strong economy, businesses are no longer forced to borrow at any cost,” Arora said of the trend. “Alternative lenders that charge substantially higher rates tend to be receiving requests from borrowers that are less creditworthy than others.”