Jul 24, 2013 Sean Albert
Small business lending is one of the more crucial aspects of economic wellness in the United States, as the nation's entrepreneurial community is responsible for the majority of hiring and gross domestic product each year. Since the economic crisis when more traditional sources of credit experienced a massive downturn, small business owners have largely turned to alternative financial services.
Alternative lenders have leveraged advanced technology in efforts to achieve the highest approval rates and the quickest turnarounds on loan applications. This has been a boon for the small business sector and, despite the fact that traditional lenders are experiencing a resurgence, alternative financial services continue to be a driving force for entrepreneurs across the nation.
Alternative lenders continue growth
The most recent Biz2Credit Small Business Lending Index revealed that the nation's alternative lenders once again increased approval ratings for loans to entrepreneurs in June. This helped drive increases for the small business lending market at large, despite decreases in approvals among larger financial institutions.
According to the report, alternative lenders increased approval ratings to 63.4 percent, which is much higher than larger financial institutions and smaller banks, which approved 16.9 percent and 49.8 percent of the applications last month, respectively. Credit union approvals dropped to 44.8 percent in June as well.
The firm noted that alternative lenders rolled out a variety of new products last month, which was partly the reason for growth in approval ratings. For the past year, alternative lenders have approved more than 60 percent of all loan applications each month. What's more, alternative lending approval ratings increased by 1.5 percent compared to the same period last year.
Biz2Credit added that smaller banks and larger financial institutions are beginning to utilize the same methods as alternative lenders, especially when it comes to more advanced technology and platforms. However, there are no signs that either of these sectors, nor credit unions, will be able to catch up to alternative lenders anytime soon.
Room for growth?
While the alternative financial services sector has grown substantially in the past 5 years, there are still signs that organizations in this industry will continue to increase both approval ratings and loan disbursement volumes in the coming years. Small businesses are most responsible for this growth, and with improvements in consumer spending and employment prospects, more entrepreneurs will likely need additional credit.
Alternative lenders provide quick turnarounds on loan applications to help small business owners access the working capital they need to succeed.