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Big Banks · Credit Quality · Fintech Competition · Small Business Lending
Big banks, including Wells Fargo, JPMorgan Chase, American Express, and Bank of America, are significantly increasing their small-business loan approvals, with big banks' approval rates reaching a post-recession high of 24.5% in July, driven by improved credit quality and competition from online lenders.
These major financial institutions had largely withdrawn from the small-business lending market during the 2008-2009 financial crisis, creating a void that smaller banks and online lenders filled. Now, with balance sheets described as "pristine" by Gerard Cuddy, CEO of Beneficial Bancorp, and a desire to capture profitable loans, banks are re-engaging.
American Express expanded its offerings to include merchant financing and term loans. Bank of America developed in-house products like unsecured lines of credit, increasing its SBA 7(a) loan approvals by 59% to $111 million through June 30.
JPMorgan Chase partnered with OnDeck Capital, and Wells Fargo introduced FastFlex for rapid online loan decisions. This aggressive push is a direct response to online marketplace lenders "feasting" on the market, as stated by Brock Blake, CEO of Lendio, and a realization that banks risk losing their best customers if they do not offer competitive digital solutions, according to Rohit Arora, CEO of Biz2Credit.
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