Big Banks Dive Back Into Small Business Lending

After years of low approval rates from big banks for small business loans following the financial crisis, things have finally started to turn around.

By Tracy Kellaher, VP of Business Development & Lender Relations for Biz2Credit

Approval rates on business loans from big banks (those with over $10 billion in assets) have improved dramatically over the past year, according to the Small Business Lending Index from Biz2Credit.

“Credit union approvals of small business loans have plummeted from 57.6% a year ago to a low of 45.2% — a 12.4% drop. There is no indication that this trend will reverse soon.”

The index, which has been tracking bank approval rates since January 2011, compiles data from companies applying for loans from $25,000 to $3 million. All companies in the study have been in business at least two years and have credit scores above 680.

The index shows that big bank approval leapt in September 2012, and since then it has been steadily increasing. In April big bank approval rates for small business loans reached a record high, peaking at 16.8%. In a year-to-year comparison, approvals at big banks are up over 50%.

Month Big Bank
Approval %
Small Bank
Approval %
Credit Union
Approval %
Approval %
Apr. 2012 10.6% 45.9% 57.4% 63.0%
May 2012 10.2% 45.5% 57.6% 63.2%
Jun. 2012 11.1% 47.5% 55.8% 62.9%
Jul. 2012 11.3% 47.4% 54.6% 64.1%
Aug. 2012 10.9% 47.8% 52.9% 64.5%
Sept. 2012 14.2% 47.6% 52.4% 64.6%
Oct. 2012 14.8% 50.1% 49.2% 64.7%
Nov. 2012 13.2% 49.2% 48.4% 64.5%
Dec. 2012 14.9% 49.8% 47.6% 63.8%
Jan. 2013 15.3% 49.9% 46.9% 63.7%
Feb. 2013 15.9% 50.3% 45.9% 63.7%
Mar. 2013 15.7% 50.8% 45.5% 63.6%
Apr. 2013 16.8% 50.9% 45.2% 63.4%

( Read More: Satisfaction With Small Business Banking Keeps Dropping )

There are a few factors behind the improvement. For starters, the economy has improved, making credit more readily available. For the past year and a half, market conditions have been relatively stable — this despite fears of fiscal cliffs and Congressional sequestration. And September’s 30% jump in big bank business loan approval rates coincided with an unexpectedly good jobs report, and this year’s highs match a stock market that has been climbing rapidly since November.

Big banks are focusing on small business as key part of their strategy to meet capital requirements in the wake of Dodd-Frank regulations. Financial institutions may have finally awakened to the fact that years of low approval rates for business loans can sour the tenuous relationship between banks and small businesses, discouraging depositors and borrowers alike.

Initiatives from the Small Business Administration are another significant reason for the increase in big bank approval rates. Starting in October, the SBA will waive fees for lenders and borrowers for smaller ticket loan programs ($150,000 and less). Also, last year the SBA partnered with 13 big bank lenders — including Chase, Wells, Citi — and BofA to commit $20 billion to lend to small businesses over three years, with an emphasis on small-dollar loans and underserved communities. These funds have already started making their way into the hands of small businesses, further boosting approval rates. And the fact that SBA-backed securities now have very attractive premiums make it even more worthwhile for the big banks to extend credit and take the government guaranty.

All this is good news for small business owners, who were left largely with only higher interest rate options from alternative lenders during the depth of the crisis. Big banks’ lower cost of capital and corresponding lower rates is certainly attracting the business back.

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This article was originally published on May 17, 2013. All content © 2018 by The Financial Brand and may not be reproduced by any means without permission.


  1. Big banks have not completely eased on their guidelines and several business owners are still facing challenges in securing working capital. Most are getting denied by banks because of a minor hiccup in their credit profile, others because they do not have any collateral, which most business owners do not have. The thing is that most of these businesses have great cashflow and are just looking for a little boost just to get on track, to cover payroll, to purchase inventory, for expansion, to purchase equipment and the list goes on. Don’t give up hope if you have been denied by the big banks! Hopefully we all get through this and see our economy restored to what it used to be. Look up Yendora Capital.

  2. I have to agree 100% with Leslie! It can still be a great challenge to obtain finance from the banks – especially without siginficant collateral. Alternative finance and lenders are what is needed to help businesses expand and thrive as we cannot depend upon the banks.


  3. Please, let’s ease up on the self-promotional comments…

  4. I truly believe that the problem with banks lending small businesses money is that they rely to heavily on credit score. This day and age business owners often have a true hardship situation where they may have had a problem in the past where their credit was damaged, but in actuality they do have a good business that is generating money, but not enough money to invest in key areas like marketing, hiring, etc..

    Small business loans should be based on how healthy a business is. The health of a business should be based on how much annual revenue the business is generating. If a business can show they have over 20k in annual revenue being generated each month, then they should be able to get a $50,000 loan.

    Who agrees with this?

    It is good to see that banks are increasing the amount of money that they are lending because business owners in our country need it.

    We also offer small business loans at my company and we try not to rely so heavily on credit score.

  5. Paul, a $50,000 loan might make sense if the business has the right profit margin on its annual revenues of $240,000. But no one’s likely to give this business a loan if they are losing money every year. Net income trumps revenue.

  6. It is good to hear that more places are approving small business loans. I think that they are great opportunities for people to try out a new business, especially if they don’t have the money to fund it themselves. Plus, when more reputable places are willing to lend money, it makes people more confident in their lender and interest rates.

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