Credit unions distributed fewer small-business loans last month than a year earlier, but they still approve credit at a much higher rate than big banks, a study by Biz2Credit found.
Credit unions accepted 43.5% of the loans requested by small businesses last month, down from 45.1% in July 2013, according to the study by the online loan marketplace.
Meanwhile, the study showed that banks with at least $10 billion in assets are becoming more aggressive when it comes to giving out small-business loans, but they still approve credit at a much lower rate than credit unions, smaller banks and alternative lenders.
Small-business loan approval rates at big banks rose to 20.1% last month, more than two and a half percentage points higher than a year earlier, according to the study.
The larger banks are using their advantages with branding and technology to be more efficient players in small-business lending, Rohit Arora, chief executive of Biz2Credit, said in the monthly report.
The lending approval rates for small banks, classified as having less than $10 billion in total assets, increased 150 basis points from a year earlier, to 50.9%. However, approval rates decreased from June by 50 basis points.
Approval rates at alternative lenders decreased for the sixth consecutive month, to 62.9%, compared with 63.2% a year earlier.
Institutional lenders granted 59.3% of the funding requests they received last month.
Since Biz2Credit starting tracking this group in January, institutional lenders have continuously approved more small-business loans than in the prior month.
"Institutional firms have roared into the small-business segment and created fierce competition for other so-called alternative lenders," Arora said. "This competition is lowering the price of alternative lending products, which is good news for borrowers, particularly those whose credit scores are not high enough to qualify for loans from traditional banks."
The Biz2Credit study analyzed 1,000 loan requests ranging from $25,000 to $3 million from businesses opened at least two years that have an average credit score above 680.
