February 2019 has been a rewarding month for small business owners as they received record-high loan approvals from big banks. The percentage of loan approvals by these banks reached a satisfying 27.2% in the last month. However, the approval rate went down at small banks, other lenders and credit unions that offer traditional banking services. These results were shared by Rohit Arora, CEO of Biz2Credit Small Business Lending Index.
Biz2Credit was founded in 2007 and has a virtual platform that connects business lenders and borrowers. It is rapidly increasing its digital network that offers state-of-the-art technology and solutions for banks, investors and other financial setups. It was amongst the top 200 fast developing tech companies of 2018.
According to Arora, the rate of investment is on the lower side but the recent economic performance of many companies has put them in a favorable position to receive loans. A leading expert ofhis field, Arora, is currently seeing a stable future for small businesses as the central banking system of America, the Federal Reserve System, is slowing down the upward trend of interest for borrowers. He shared the good news that money is readily available for small business ventures.
This positivity was shared by Federal Reserve Chair Jerome Powell who was of the view that the American economy seemed well-placed and its future appeared quite promising. He cited subdued inflation and appropriate policy rate as encouraging indicators.
However, as Powell saw interest rates increase four times during his tenure he seemed cautious. He was of the opinion that as the global economy appears to be slowing down, a lot has to be observed and evolving trends have to be monitored closely before making any changes in policies regarding interest rates.
Powell predicted a steady and secure growth rate but said that it might be slower than 2018 when the growth rate was the highest since the economic crisis.
On the other hand, small banks did not share the confidence of bigger banks; their approval of loan applications for small ventures dropped to 48.6% in February from 49.8% in January. The rate of loan approval by alternative lenders also saw a slight downward trend from 57.3% to 57.2% in February. This was echoed by a slight dip in loan approvals by credit unions that went down to 40.2% in February from 40.3% in January. The JobsReport published on March 8 reported an alarming decrease in the number of new jobs created as only 20,000 new jobs were offered. In addition, a marked downward trend was noticed in January in the NFIB Small Business Optimism Index.
However, currently the optimism is above average and Arora of Biz2Credit believes that the economy is stable despite the government shutdown that lasted for 35 days. The loan approval rate of institutional lenders saw an increase in February as compared to the previous month and even though 2019 may not be as good a year as 2018, it seems well for small business owners.