Merchant capital funding, alternative business loans and traditional business loan approvals dip in March
The March figures from the Biz2Credit Small Business Lending Index shows a dip in small business loan approvals from the big banks, which fell from 19.1% in February to 18.8% this month, bringing to an end a three month positive trend. While the first quarter of 2014 ends on a slight low, overall big bank small business loan approvals are up by just over 18% year on year.
Small bank approval rates showed a slight increase from last month, rising from 51.4% to 51.6%, 0.2 points up month on month and 0.3 points up on the same time last year. Credit union approval rates are down around 5% year on year, although there was a slight increase of 0.3 points from last month.
The alternative lenders approval rates have remained largely unchanged year on year and end the first quarter at 63.6%; 0.1% lower than in 2013. Approval rates fell by the same rate as the big banks month on month, although merchant capital funding and alternative business loan approvals are still eclipsing those at the big banks.
Small business owners seeking a fast injection of capital are still opting for merchant capital funding from alternative lenders due to the speed at which finance can be obtained, making it possible to quickly respond to market changes rapidly and take advantage of new opportunities. Merchant funding approval is granted in a matter of days, while small business loans from traditional lending sources can still take many months to process as it can take a considerable amount of time to complete the complicated process of assessing applicants’ suitability.
The figures may not paint a good picture for small business owners who have been struggling to obtain a small business loan in recent months, but the drop may be just a temporary dip which can be attributed – in part at least – to the approaching deadline for submitting income tax returns. Tax data is relied upon by the traditional lenders and since it is a busy time of year for CPA’s, a dip in small business lending can be expected as process slow down at this time of year. Next month’s Small Business Lending Index figures should give a better indication of whether the upward trend has halted or if this is just a temporary dip in loan approval rates due to the time of year.
Non-traditional lenders providing alternative lending options such as merchant capital funding use a different credit scoring system to assess the suitability of applicants and merchant funding applications are not generally noticeably slowed at this time of year. This should come as good news for small business owners needing fast small business loans and a quick injection of capital to cover essential bills and staff costs.