From June to July 2021, small business loan approvals at large banks fell from 13.6% to 13.8%. The data comes from the latest Biz2Credit Small Business Lending Index. The index also signals an increase in loan approvals from institutional and alternative lenders in July.
Biz2Credit Index of Small Business Loans – July 2021
The increase in small business loan approvals comes as the segment created 91,000 new jobs in July. And as the economy begins to emerge from the pandemic, lenders are also looking to help small businesses with their recovery. But not everyone is keen to approve small business loans.
According to Rohit Arora, CEO of Biz2Credit, “Big banks are still relatively stingy when it comes to lending to small businesses. This opens up opportunities for small banks and alternative lenders to gain market share â€,
The percentage approval rate at small business banks is up half a percent from a year ago. And it went from 18.9% in June to 19.1% in July for this year. Higher approval rates are also shared with non-bank lenders.
Higher approval rates among non-bank lenders
Non-bank lenders provide finance to women-owned and minority-owned businesses because they don’t just focus on FICO scores. This according to Arora who also said that these lenders are focusing on “… more on the financial health of borrowers applying for financing”.
For these lenders, institutional lender approval was 23.9% in July. This is an increase of two percentage points from a year ago and a tenth of a percent from 23.8% in June. Likewise, the rate of alternative lenders increased by 0.2%, from 24.5% in June to 24.7% of financing requests in July 2021. At the same period last year, the approval of alternative lenders was 23.1%.
Credit unions, which specialize in meeting the needs of small businesses, approved 20.5% of funding requests in July. This is the same rate as in June, but is down almost a percentage point from 21.2% last year.
PPP loans to small businesses and opening the forgiveness portal
Last week, the U.S. Small Business Administration (SBA) opened its Paycheck Protection Program Direct Forgiveness Portal. The initiative for this program is to help businesses apply for Paycheck Protection Program (P3) loan cancellation directly through the SBA.
This is limited to loans of $ 150,000 or less, but streamlining this process will allow small business owners to get their requests answered quickly.
The Biz2Credit Small Business Loan Index
The Biz2Credit Small Business Loan Index analyzes 1,000 loan applications on the Biz2Credit website every month. And the index then reports the loan approval rates for small business finance at different lending institutions. This includes large banks (over $ 10 billion in assets), local and regional banks. It also reports to non-bank lenders (credit unions, community development financial institutions (CDFIs), micro-lenders and others).
Images: Biz2Credit
