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Biz2Credit, an online lending marketplace geared toward small businesses, has received a $250 million investment capital agreement from Direct Lending Investments, a fund that purchases small business loans through online and peer-to-peer lending platforms.
December 29 -
Approval rates for small-business loans dropped at big banks for the first time in seven months, as nonbanks continue to grant loans at a much more generous pace.
November 11 -
Leaders of smaller banks optimistic about the growth prospects of small-business loans in 2015, but they are equally worried about increased competition from larger banks, nonbanks and credit unions.
January 7 -
Tailoring services to meet small-business owners' needs from bookkeeping to strategic planning can pay off in increased fee income now and new loans later.
December 29
Small-business lending approval rates at big banks and institutional lenders reached post-recession highs in December, while small banks and alternative lenders have seen fewer completed deals, according to Biz2Credit data.
Banks with more than $10 billion of assets granted 21.1% of loan applications during December. Big bank approval rates are up nearly 20% year over year, Biz2Credit said.
"The higher percentage of loan approvals at big banks is good news for small-business owners," said Rohit Arora, the chief executive at Biz2Credit, a New York-based online lending marketplace. "However, big banks typically seek to grant loans of $500,000 or more and much prefer loans in excess of $2 million. Many startups and young companies do not need that much money."
Institutional lenders are also playing a larger role in small-business finance, approving 60.1% of funding requests they received in December. Approval rates by institutional lenders have increased every month since Biz2Credit began monitoring this category at the beginning of last year.
"Institutional lenders are offering a wider variety of financial products that are more attractive to borrowers, including longer terms and lower interest rates," Arora said. "Creditworthy borrowers are increasingly opting to apply for loans at institutional lenders because of the simplicity of getting financing from these lenders and more attractive terms that are offered."
Meanwhile, small banks denied more than half of their loan requests for the second consecutive month, as approval rates fell to 49.7% in December. Lending approval rates at small banks have declined for seven straight months, though compared to a year earlier the numbers are nearly identical.
The emergence of institutional lenders has impacted alternative lenders, which have seen a gradual decline in loan approval rates throughout all of last year. Alternative lendersmerchant cash advance companies, factoring firms, and other nonbank institutionscompleted 61.8% of loan requests in December, down nearly six percentage points year over year.
"Small-business owners' financial have improved. Their performance is better and they are increasing their business credit scores," Arora said. "As a result they are not as desperate for money as they were during the recession when many alternative lenders could charge very high interest rates."
The Biz2Credit study analyzed 1,000 loan requests of $25,000 to $3 million from businesses opened at least two years that have an average credit score above 680.
