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Small Business Loans Appear to be on the Rise

Small business loans appear to be on the rise, but index discrepancies remain

With some of the largest banks in the country reporting huge increases in the number of small business loans they have given out - not to mention the slew of surveys that were recently issued that shed positive light on small business lending - it seems small business financing could be on the right track.

However, there are a few outlying surveys that show otherwise, which are keeping many from becoming overly optimistic, Business Finance Magazine reports.

On the one hand, the most recent Thomson Reuters/PayNet Small Business Lending Index, which measures the number of new commercial loans and leases given to small businesses, saw a solid rise between September and November of last year. Currently, the index is at 108.3, up from 94.1 in September. 

"Certainly there will be bumps in the road, but we feel the overall trend for small business lending is an upward trajectory," said Terry Robinson, president of The Lending Circle and Sunovis Financial.

This number is corroborated by Bank of America's recent push to give out more small business loans, according to Business News Daily. In 2012, BofA increased its small business lending by 28 percent. By the end of the year, the financial institution gave out $8.7 billion in new credit to small firms.

But the bank didn't stop there. It also hired more than 1,000 new small business loan officers to promote such lending. These workers brought an added expertise that helped small businesses handle their unique needs.

"With the creation of the small business banker role, Bank of America responded directly to what our clients asked for - locally based small business experts who provide small businesses with the financial solutions necessary to sustain and grow their business," said Robb Hilson, small business executive for Bank of America.

BofA competitor Chase also ramped up its small business lending. In Florida alone, the bank gave out $640 million in loans last year, a 22 percent increase compared with small business lending in the previous year, according to the Florida Sun Sentinel.

Chase added that Florida was one of the best states in the country for receiving a small business loan.

The most recent Federal Reserve Senior Loan Officer Survey is also stoking confidence that small business lending may be picking up. The survey, from October 2012, found that although the bulk of lenders - 90 percent - said lending standards have gone unchanged, 9.1 percent said they have somewhat eased their credit-giving policies, compared to only 1.5 percent that said they had tightened the reins on credit standards.

However, just like most positive economic news these days, there are caveats. According to the media outlet, the Biz2Credit Small Business Lending Index noted that although the approval rate for small business loan applications at major banks like Chase and BofA increased 13 percent in the last two months of 2012, the application approval rate at credit unions slid slightly. This marked the seventh consecutive month of declines in the index.

Also, the index showed loan approvals from alternative lenders saw a modest decrease.

Rohit Arora, Biz2Credit's co-founder and CEO, explained that he believes the drop in approvals from other members of the financial services sector was likely due to the large jump in approvals from big banks. There were likely more risky borrowers lining up for approvals from alternative lenders, which led to more declined loans.

While most of the evidence points to an improving climate for small business lending, there are certainly a few drawbacks that, even if could be potentially explained away, are keeping many experts from becoming too optimistic. How do the mixed results of the surveys sit with you?