Approvals of loan applications from small business owners reached post-recession high mark (26.9%) at big banks (assets of $10 billion+), while small banks granted more than half of the small business funding requests they received in November 2018, according to the latest Biz2Credit Small Business Lending Index™.
Overall, 2018 has been a good year for both borrowers and small business lenders. Because the economy continues to show strength and companies are doing well, small businesses in search of capital have been able to find it. For good reason, optimism among entrepreneurs remains high, according to the October NFIB Small Business Optimism Index, which has trended upward for the past two years.
Meanwhile, the Fed has continuously raised interest rates over the past 18 months. While there are signs that the increases may slow down, the hikes have made it more profitable for banks to loan money – especially when compared to the near zero interest rates that were in place during the post-recession credit crunch.
Technology has played an important role, too. Data analytics have become very advanced and have helped reduce lender risk. Thus, default rates on business loans are lower than ever before, according to Biz2Credit’s data. Further, banks and credit unions have been making SBA loans at record volumes.
SBA loans come with government guarantees against default that mitigates lender risk, thereby providing incentives for institutions to lend money to businesses that might not otherwise qualify for term loans. SBA loans help thousands of small businesses get off the ground each year, and I do not see an end to this trend anytime soon. SBA lending helps bolster the economy.