Small business loan approval rates increased at big banks in February, according to the Biz2Credit Small Business Lending Index. The approval rate reached 24.1 percent, growing for the seventh consecutive month and reaching new post-recession highs. The index shows loan approval percentages at big banks have increased eleven times over the last calendar year and are up more than one full percentage point. Institutional lenders’ loan approval rates are also up, hitting a new index high of 63.5 percent.
Capital spending among small business owners also reached its second-highest post-recession level, according to the National Federation of Independent Business Small Business Optimism Index March report. Business owners reported spending on new equipment, vehicles and improving or expanding their facilities. The bump in both capital spending and loan approval rates comes during an increase in optimism among U.S. small business owners. According to the American Express Global SME Pulse, more than half of U.S. executives are positive about the global economic outlook over the next 12 months.
“Small and medium-sized enterprises have put strategies in place to grow product and service innovations, quickly respond to changing business demands and develop and retain skills and talent to help them thrive,” said Brendan Walsh, Executive Vice President, Global Commercial Payments, American Express. “They are confident about and invested in the future of their businesses.”
While big banks and institutions saw growth in the small business loan market, approval rates at small banks dropped in February, the first decrease in the last six months. According to the Index, approval rates dropped one-tenth of a percent to 48.8 percent, while online lending approval rates also fell slightly, dropping to 58.4 percent in February from 58.5 percent in January. Approval rates at credit unions remained unchanged at 40.8 percent.
According to the American Express survey, 58 percent of small and medium-sized enterprises rely on bank loans and 50 percent on existing working capital to fund their investments. The survey also shows that six in ten small businesses said they face difficulty accessing financing to grow their businesses, and that many plan to look to non-bank sources of finance such as private equity, crowdsourcing and credit cards over the next year.