NEW YORK-For the seventh month in a row, credit union business loan approval rates were down in December, according to the Biz2Credit Small Business Lending Index, while big banks saw a 13% increase in business loan approvals.
Small business loan approval rates at banks with $10 billion or more in assets jumped to 14.9%-that's up a full 13% from the month before, Biz2Credit said.
"After a hiccup in November, big banks are coming back strong into the small business lending game," said Rohit Arora, Biz2Credit co-founder and CEO in a statement. "When we look at how difficult it was to secure capital from large banks a year ago, we can see just how much the lending landscape has improved during all of 2012."
Small bank approval rates also increased in December, climbing to 49.8% from 49.2% in November 2012. A year-to-year comparison indicates that the small bank approval rate in December 2012 was also up from the figure of December 2011, which was 47.1%.
Contrast those bank results with credit union results. Credit union approvals of small business loans slipped from 48.4% in November to 47.6% in December 2012, the seventh month in a row for this decline.
CUs Have Not 'Modernized'
"We are seeing that large and small banks are stepping up in small business lending, while credit unions continue to slide. Many credit unions have not modernized their procedures and still request small business owners to come into their offices and become members before considering loan requests," Arora explained. "Traditional banks are better at automating the lending process and are showing that they are more willing to make small business loans than they were 12 months ago."
In addition to the fact that credit unions can only make loans to a small business owner if the owner agrees to join the CU, as bank approval rates increase, more small businesses may be likely to turn to banks instead of credit unions and other alternative lenders, potentially decreasing the quality of the applicants and, in turn, decreasing the approval rating, Arora noted.
