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Traditional Lenders Strengthened September SMB Lending Activity

Just days after the Federal Reserve released a report highlighting the changing role of small business loans at community banks, the latest Biz2Credit Small Business Lending Index published, suggesting small and medium-sized business (SMB) lending at small banks remains strong.

The Index, released Wednesday (Oct. 11), found that small business loan approval rates at small banks increased 0.10 percent in September hitting 49.1 percent.

“If you are seeking small business loans, you have a better chance now at securing funding than any other time since the Great Recession,” said small business loan financier Biz2Credit CEO Rohit Arora in a statement. “Big banks are approving nearly a quarter of the applications they receive from small businesses. Small banks are doing a lot of SBA loans, and institutional lenders are on the rise. The small business credit market is robust at the moment for anyone who has a decent credit history.”

The Federal Reserve found in its “Community Banking in the 21st Century” report, released last week, that small business lending at community banks actually decreased by 2.2 percent in 2016 compared to the year before. Meanwhile, large banks saw their SMB lending activity increase by 5.1 percent. The Fed concluded that the role small businesses play in community banks’ overall strategies is in flux.

A monthly view of small business lending in the U.S. by Biz2Credit, though, suggests the industry is enjoying some regained strength — at least among traditional lenders. According to its latest index, approval rates for small business loans among alternative lenders actually declined one-tenth of a percent, though approval rates are still high at 57 percent.

“Alternative lenders still play a valuable role in small business finance because they provide funding to businesses with poor credit scores or no credit history at all,” Arora said. “They make quick decisions and accept higher levels of risk. However, they charge higher rates than other types of lenders.”

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