February 16, 2014 - When it comes to small business loans, the laws of supply and demand are helping to increase approval rates in 2014. Large and small banks, as well as non-traditional lenders are increasingly searching for deals to fund. This is great news to small business owners in Las Vegas, and all across America.
As the US experienced the credit crunch, banks held on tight to their assets. Yet, over the last few years, banks and lenders have gradually begun taking part in small business lending again. So, what caused them to rethink their decisions to keep a tight lock on their lending vaults? Some are accrediting it to the country’s slow mortgage-rebound and the Dodd-Frank Wall Street Reform Act.
Big Banks Increase Approval Rates for Small Business Loans
‘Big banks’ are considered to be those with assets totaling more than $10 billion. According to Biz2Credit's Small Business Lending Index, in January 2014, their approval rates for small business loans rose to 17.8 percent. The new high was a slight increase from December 2013, when approval rates were 17.6 percent.
The good news is that small business owners considered to be creditworthy borrowers are getting approved for loans from big banks. This is a great help for keeping average interest rates at historical-lows.
Small Banks and Lenders
And, the increase in small business loan approval rates is trickling over into the small banks and lenders, as well. Over 50 percent of the loan applications submitted to small banks are now being approved. A major factor behind this new trend is the increasing popularity of the following: Small Business Association (SBA) programs:
- SBA Express program, which funds loans below $350,000
- SBA 7(a) program, which funds loans between $350,000 and $5 million
Both of these popular SBA loan programs are currently offering very attractive and affordable interest rates on their loans.
Surprisingly enough, even some credit unions are also making the leap into the SBA loan-game. Adding more players to the playing field increases the amount of capital available for small businesses. The more capital, the better the game is for borrowers hoping to start, buy and grow their small companies.
In 2013, the US saw an emergence of small business lending players. Some were alternative lenders, who became ideal creditors due to their ability to make quick decisions. In many cases, their healthy stream of capital came from lucrative technology investments. However, these alternative lenders had a tendency to charge interest rates much higher than the banks.
As more and more non-bank lenders dove into the credit market for small businesses, they were forced to offer more affordable interest rates. This became a major benefit for small business owners, who have been doing a lot better since the economy has improved.
Now, since the credit crunch of the post-recession, most aren’t so distressed about capital. This has resulted in attractive interest rates taking precedence over the need to be funded quickly.
Then, there are the institutional lenders. This is a broader category which includes:
- Family funds
- Insurance companies
- Credit Funds
- Non-bank, yield-hungry financial institutions
Institutional lenders are quickly all becoming major players in the small business lending industry. Typically, they offer loan products that are priced much more competitively. Their interest rates are slightly higher than most banks.
Yet, they’re substantially lower than alternative lenders with their speed-focused loans. Generally, for short-term loans, alternative lenders charge about 30-50 percent interest.
Las Vegas Small Business Development Resources
Looking for local resources to help you start, buy or expand a small business in the local Las Vegas area? Contact the agencies below for more information on developing your Las Vegas small business:
- Small Business Association (SBA) – State of Nevada Local SBA Resources
- Nevada Small Business Development Center (NSBDC) – Las Vegas NSBDC Offices
- SCORE Counselors to America’s Small Business – Southern Nevada Chapter 243
- University of Nevada, Las Vegas – UNLV Business Startup Center
My advice to small business owners and entrepreneurs: Don’t jump at the first loan approval you obtain. Instead, speak with local lenders and search the Internet for small business lending funds and deals.
Thanks to supply and demand, the cost of securing capital for your small business, whether in Las Vegas or anywhere in the US, can be very reasonable in 2014.