B2B Payments

Big Banks Continue SMB Lending Uptick, Biz2Credit Finds

Small business hiring may have petered out in January, but lending to SMBs certainly didn’t.

The latest Biz2Credit Small Business Lending Index found SMB lending among large financial institutions (FIs) continued to climb, reaching a 25.3 percent approval rate in January.

“Despite some recent bumps, the economy has done well during President Trump’s first year in office, and tax cuts have also added to optimism among small business owners,” reflected Rohit Arora, CEO of Biz2Credit. “With the economy showing such good signs, the number of small business owners applying for loans has risen. They are showing confidence and are willing to take risks.”

Small banks saw a slight increase in small business loan approvals from December to January, hitting a 49.1 percent approval rating last month — though the report noted that these community and regional banks have been unable to reach a 50 percent approval rating since October 2014.

An increase in traditional banks’ small business lending activity comes after new data from The Wall Street Journal published this week found banks are closing physical branch locations at record levels. FIs closed 1,700 branches in the 12 months ending June 2017, the publication’s analysis found, the largest one-year drop on record.

Meanwhile, institutional lenders’ approval ratings held steady at 64.3 percent, while alternative lenders continued their decline of small business loan application approvals, which sat at 56.6 percent in January. According to Biz2Credit, alternative lenders have gradually reduced their approval rates nearly every month for the last two years.

“Alternative lenders remain a source of funding for businesses that need money quickly or that have less-than-stellar credit histories,” Arora noted. “With an economy ripe for entrepreneurship, borrowers at various levels of creditworthiness continue to apply for credit. Often, companies that cannot find funding from banks are able to secure financing from alternative (non-bank) lenders.”

Research from CBIZ, ADP and others released this month found that small business hiring grew at a slower pace in January, despite job performance among companies of all sizes in the U.S. actually surpassing analysts’ expectations.

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LATEST PYMNTS REPORT: MARCH 2020 B2B API TRACKER  

B2B APIs aren’t just for large enterprises anymore — middle-market firms and SMBs now realize their potential for enabling low-cost access to real-time payments and account data. But those capabilities are only the tip of the API iceberg, says HSBC global head of liquidity and cash management Diane Reyes. In this month’s B2B API Tracker, Reyes explains how the next wave of banking APIs could fight payments fraud and proactively alert middle-market treasurers to investment opportunities.

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