Small business loan approval percentages at large banks (or those with more than $ 10 billion in assets) edged up from 13.4% in April to 13.5% in May, according to the latest Biz2Credit Index of Small Business Loans. In addition, approvals at smaller banks jumped from 18.2% in April to 18.7% in May.
“Loan approvals by small banks rose 0.3% as banks begin to assess favorable economic conditions that begin to emerge as lockdowns ease and more people receive COVID vaccine- 19 â€said Rohit Arora, CEO of Biz2Credit. “Pent-up consumer demand is a compelling story that small business owners can use as part of their case for financing. Banks, especially small community and regional institutions, are taking note of this trend as they begin to open their lending operations to the post-pandemic reality. “
According to Biz2Credit, next month’s loan numbers will be significant now that the federal government’s paycheck protection program has completed its second round.
“Businesses that are still reeling from the economic impact of the pandemic will have to seek other sources of funding,†Arora said. “Look for business loans – especially loans from online or digital vendors – to see an increase in activity now that the PPP is closed. “
Total non-farm payroll employment increased by 559,000 in May and the unemployment rate fell 0.3 percentage points to 5.8%, according to the US Bureau of Labor Statistics. Notable job gains have taken place in leisure and hospitality, public and private education, and health care and social assistance.
Credit unions went from a 20.3% approval rate in April to 20.4% in May, while institutional lenders approved 23.6% of funding requests in May, up slightly from compared to 23.5% in April. In addition, alternative lenders approved 24.3% of funding requests in May, up from 24% in April.
“Alternative lenders saw a significant increase in approval rates in May while processing a growing number of loan applications thanks to the shift to online financing in the small business space,†said Arora. “With the conclusion of the PPP, the banks are focused on forgiveness and may not be ready to increase lending to small businesses that are not backed by the government.
“Borrowers will need to look to non-bank sources of finance, including alternative lenders, institutional lenders and credit unions. These lenders are all starting to meet demand, and many will see their approval rates rise as customers who used to get loans from a bank now seek other sources of funding. “
Biz2Credit analyzed loan applications from businesses that have been in business for more than two years with credit scores over 680 for its Small Business Lending Index. The results are based on primary data submitted by over 1,000 small business owners who applied for funding on the Biz2Credit platform.
