Small Business Loan Approval Rates Rise As P3 Ends


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The end of the Paycheck Protection Program (PPP) has arrived, and that means companies will seek funding from traditional sources. According to Biz2Credit Index of Small Business Loans for the month of May, loan approval rates increased for banks and non-bank lenders.



Small Business Loan Index – May 2021

While the higher approval rates aren’t huge, they are a step in the right direction for homeowners seeking financing. In the big banks (over $ 10 billion in assets), the jump was only 0.1% from April (13.4%) to May (13.5%). The increase for small banks was slightly larger, from 18.2% in April to 18.7% in May.

Credit unions saw the same increase as the big banks with approval rates from 20.3% in April to 20.4% in May. Ditto for institutional lenders with the same slight increase approving 23.6% of loans in May, against 23.5% in April.

In contrast, alternative lenders were more successful in approving 24.3% of funding requests in May 2021, up from 24.0% in April. Biz2Credit CEO Rohit Arora says these lenders are processing more loan applications. He attributes the increase to the shift to online finance in the small business space.

Arora added, “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.”

Small business loans to see a leap

Arora says there is pent-up consumer demand. Add to that the post-pandemic economy and small businesses are expected to experience notable growth. And to manage this growth, many homeowners will be looking for loans. According to Arora, next month’s loan numbers will be significant, especially from online or digital providers.

Brighter economic prospects

The pandemic is on its final stage as more and more people are getting vaccinated. And that will bode well for businesses of all sizes as more and more people venture out of their homes. And with summer fast approaching, the time couldn’t be more perfect for small business owners to recoup the losses of the past year and a half.

Take a look at the Biz2Credit infographic below for the rest of the data.

Image: Biz2Credit


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