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May 29th
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Applying for a business loan? Think small bank, not big

aroraRohit091311_optBY ROHIT ARORA

This week my company, Biz2Credit, released a study 1,000 small companies denied loans from their existing banks since 2010 and found, surprisingly, that TD Bank, Chase, and Bank of America customers were among the most frequently rejected applicants for funding in the Garden State.

Our analysis of primary data quantifies what many small business owners have been saying: big banks have been unwilling to lend -- even to their own customers.

These results follow a Los Angeles Times report that Bank of America has cut small business credit lines as part of a corporate overhaul that started in 2010. While Bank of America claimed that only a "very small percentage" of small-business customers have been affected by the changes, the number was in the hundreds of thousands.

What's ironic is that Bank of America has advertised that they are friendly to small business lending, but the opposite is the case. They have been the most rigid in their loan criteria and now are cutting credit lines, not only in New Jersey but all across the country. Two other big banks, which are categorized as financial institutions with more than $10 billion in assets, were among the lenders who most frequently denied funding requests: TD Bank and Chase, which ranked #1 and #2 in rejecting small business loans from 2010-11.

Percentages of New Jersey Small Business Loan Rejections by Bank

TD Bank 25.81%

Chase Bank 22.58%

Bank of America 12.90%

We are finding that the same banks that were lending to small business owners before the credit crunch essentially closed the spigots on entrepreneurs. Why did they stop lending, and when will they get back into the game? The economy was better in 2010-11 than it was in 2008-09. The businesses we looked at are survivors that made it through the recession. When they approach to smaller banks, credit unions and alternative lenders, they are getting money. The big banks are sitting on their assets!

So if you are a small business seeking funding from a bank, my advice is to think small, not big.

Rohit Arora is co-founder and CEO of Biz2Credit (, an online resource that connects 1.6 million small business owners with 450 lenders, credit rating agencies and service providers such as CPAs and attorneys via its Internet platform. Since 2007, Biz2Credit has secured more than $500 million in funding for small businesses in New Jersey and across the U.S.


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