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Small business lending on the uptick in January 2012

aroraRohit091311_optBY ROHIT ARORA
COMMENTARY

Some welcome news for small business owners seeking capital: Lending in all categories of lenders -- including big banks -- increased in January.

The Biz2Credit Small Business Lending Index, my company's monthly analysis of 1,000 loan applications, found that approval rates of small business financing requests in January 2012 by small banks and non-bank lenders increased to their highest levels in the past 12 months. Meanwhile, lending at big banks jumped two percentage points over December's rate to 11.7 percent, the highest rate since February 2011.

The big trend in small business lending continues to be the rise of alternative lenders: Community Development Financial Institutions (CDFI), Accounts Receivable financers, merchant cash advance, micro lenders, and others. In January, these institutions approved 62.4 percent of the funding requests, up from 62.2 percent of funding requests in December.

Credit unions, which have become increasingly active in small business lending, granted 57.6 percent of small business funding requests, a rise from the 57.4 percent approval rate in December 2011.

Loan approvals by small banks increased to 47.5 percent in January 2012, up from 47.1 percent in December, to reach their highest rate in the past year.

Approvals by large banks rose to 11.7 percent, the highest percentage since Feb 2011, when 11.9 percent of small business loans were granted.

Month 2011

Big Bank ($10B+ assets) Approval %

Small Bank Approval %

Credit Union Approval %

Alternative Lenders

Approval %

January

12.8%

43.5%

48.9%

49.3%

February

11.9%

43.9%

49.1%

51.6%

March

11.6%

44.2%

48.8%

51.9%

April

10.4%

44.6%

50.1%

53.6%

May

9.8%

45.0%

51.2%

53.8%

June

8.9%

42.5%

52.3%

54.9%

July

9.8%

44.9%

53.4%

52.2%

August

9.4%

43.8%

54.2%

58.0%

September

9.2%

45.1%

55.5%

61.5%

October

9.3%

46.3%

56.6%

61.8%

November

10.0%

47.0%

57.0%

62.0%

December

9.7%

47.1%

57.4%

62.2%

January 2012

11.7%

47.5%

57.6%

62.4%

Optimism seems to be returning. We have seen a 35 percent increase in month-to-month volume of new loan applications, which is a good sign. Strong holiday sales combined with latest jobs report showing that the U.S. unemployment rate fell to 8.3 percent in January -- its lowest level in 2.5 years -- indicates that brighter days may be ahead.



 

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