Bucking the Trend: Alaska Sees Rise in Business Loan Approvals
Lenders credit dropping rates, rising optimism
ANCHORAGE – Across America, small business loan approval rates dropped steadily over the last quarter: not in Alaska.
In fact, one of the largest small business lenders in the state said it’s seen an unprecedented number of approvals over the last six months. Bond Stewart of Wells Fargo said his institution approved 27 Small Business Administration loans between October 2011 and April of this year, the same number approved by the bank over the entirety of FY 2011.
“Alaska has been in a better position than other states over the last three years,” said Stewart, Wells Fargo’s Anchorage business banking manager. “It gives me hope that we’re going to end the year on a strong note.”
The SBA loans totaled around $9.5 million, and Stewart said the bank is in the process of reviewing another $9 million. Nationwide, though, bank loan approval rates have inched their way downward since January.
According to the Biz2Credit Small Business Lending Index, big bank approval rates dropped to just ten percent in April, while small banks approved around 45 percent of loan applications. The online company pairs small businesses nationwide with potential credit providers, and defines big banks as institutions with more than $10 billion in assets. Those with less than that are defined as small banks.
“High oil prices as well as the European crisis intensifying have combined to cause both borrowers and lenders to proceed with caution,” said Biz2Credit CEO Rohit Arora last week. “The flow of capital may be slowing, which is a cause of concern.”
While the index also details a decrease in SBA-backed lending activity due to the end of an enhanced loan guarantee program, Stewart said Alaska businesses continue to carve their own path.
According to a recently released Wells Fargo/Gallup survey of more than 600 small businesses across the country, owner optimism is at a new high after the economic turmoil of the past three years: Only 32 percent expected difficulty securing a loan.
Stewart said the newfound optimism was a self-perpetuating cycle rooted in historically low interest rates. As more businesses moved to take advantage of five percent rates on some loans, he said the number of approvals also jumped, boosting the feelings of financial surety among small businessmen and women.
“The rate structure has been so favorable, people go along because they think the rates are bottoming out,” Stewart said. “Then there’s the pent-up demand.”
Since 2008, Stewart said the uncertain economy had caused many customers to hold off on loans for necessary capital improvements. Now, the low rates have prompted a flood of borrowers eager to upgrade their businesses and expand their buying power after years of scarcity.
“It’s a very strong, active year,” Stewart said. “I’m feeling very bullish about Alaska right now.”