There comes a time in every new and seasoned business owner’s journey where they will need to take out a business loan. Whether it would be to invest in new equipment, to purchase real estate for their expansion, or to increase their capital to handle their everyday operations, something will always be needed.
The reality is that a little financial boost goes a long way in helping support business owners with growing pains, financial hiccups, and other challenges that are sure to come on their entrepreneurial journey.
Historically, small businesses were denied bank loans 80% of the time. Especially since the post-financial crisis, banks shifted their focus onto larger loans.
Thankfully, the financial landscape is changing and moving towards a more positive trend…an increase in small business loan approvals.
It is believed that small business lending could be the highest ever seen in history. Riding on the back of a strong economy and coupled with lower interest rates, this provides the perfect climate for the surge in approvals.
Big banks, those with an average of more than $10 billion in assets leads the way in providing 25.7 percent in small business loan approvals in April 2018. Since they are the biggest players in the industry, borrowers can take advantage of their lower interest rates and best term lengths. Banks also profit handsomely from the Federal Reserve’s steady increases in the interest rates.
The second major players, regional and community banks, are also great financial resources for business owners. In April 2018, they approved 49.2% of the loan requests received, which increased by two-tenths of a percent from the previous month in March.
These small banks are also known for processing SBA loans, which minimize risks for lenders, making it easier for them to lend to startups.
Institutional lenders are also growing in importance in the small business lending space. These include insurance companies, pension funds, family funds, and other non-bank lenders. Their lending approval reached 64.6 percent in April 2018, from an increase of one-tenth of a percent from March. What’s great about these lenders is their low-interest rate and terms.
For those businesses with less than perfect credit ratings, they have the alternative lenders. Although they did experience a drop of one-tenth of a percent to 56.4 percent in April, these alternative lenders are still a popular alternative for those with poor credit as they approve more than half of their requests. The drawback is that they do charge higher interest rates.
Credit unions, although struggling to compete with other banking giants, are still another favorite source of capital for businesses. Their approval rate was 40.2 percent of loan applications in April, gaining a one-tenth of a percent from March.
The bottom line is that that the barriers to requesting and being accepted for a small business loan has been eliminated. It is no longer a daunting task only to be met with rejection.
With a robust economy, growing consumer confidence, and favorable interest rates, banks are putting their economic force for good, helping fuel local economies by funding small businesses.
If there ever was a time in history to ask for a small business loan, it is now.Get Started Now