Small Business Lending Surges



Big banks are getting back into the small business lending game. According to the latest Small Business Lending Index from the online lending site Biz2Credit, small business lending approvals from big banks reached 17.6 percent, making it the second straight all-time high for the monthly loan tracker.

That 17.6 percent was up from 17.4 percent in July, according to the index. And the approval rate is an astonishing 62-percent higher, year-over-year as big banks quickly ramp up their loans to small businesses.

"Five years after the Great Recession, the small business lending landscape is better than at any time since 2008," Rohit Arora, CEO of Biz2Credit, said in a statement.

Banks have increased the amount of funds they're willing to lend, and more banks have entered new markets—including the markets for restaurant and franchise lending. So they've grown more aggressive in courting borrowers and pricing out loans. As this has happened, the lending market improvement has trickled down toward smaller loans.

The Biz2Credit index is a monthly analysis of 1,000 loan applications on its website. The New York company, founded in 2007, analyzed loan requests ranging from $25,000 to $3 million from companies in business more than two years, and with an average credit score above 680. Biz2Credit is a site that connects borrowers and lenders.

In the recession's aftermath, big banks had largely avoided small business lending, leaving alternative lenders and smaller banks to pick up the slack. In August 2012, for instance, the big bank approval rate was just 10.9 percent, while small banks approved 47.8 percent of loans, credit units approved 52.9 percent of loans and alternative lenders approved 64.5 percent.

But small banks' approval rates have risen to 50.7 percent. That, along with the increase in approvals by big banks, is affecting credit unions and alternative lenders, both of which saw their loan approval rates fall over the past year. Arora noted that banks attract better borrowers, and so those borrowers are less likely to seek out loans from alternative funding sources. 

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News, notes and commentary on franchise financing, including SBA lending, both the SBA 7(a) program and the SBA 504 program, franchise finance programs, development incentives, big deals and startup lending.

  Mary Jo Larson is the publisher of Franchise Times Magazine and its sister publication, the Restaurant Finance Monitor. She is a frequent speaker at meetings and conferences, and at the Restaurant Finance & Development Conference. You can find her on Twitter at @mlarson1011.
  Reporter Jonathan Maze covers restaurants and finance for Franchise Times. He also writes for our sister publication, The Restaurant Finance Monitor, and writes a daily blog on the restaurant industry at www.restfinance.com. You can also catch him on Twitter at @jonathanmaze.

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