Small Business Loan Approval Rates Up at Big Banks

From June to July of 2021, small business loan approval at big banks increased from 13.6% to 13.8%. This data is derived from the Biz2Credit Small-Business Lending Index. In July, the index reported a rise in loans approved by alternative and institutional lenders.

Biz2Credit Small Business Lending Index – August 2021

The increase in small business loan approvals comes as the segment added 91,000 new jobs in July. Lenders are looking for small business loans to assist them in recovering from the economic downturn. However, not all lenders are willing to lend to small businesses.

According to Rohit Arora (Biz2Credit CEO), “Big banks are still comparatively conservative in their small-business loan-making.” This opens up market opportunities for small banks and alternative lenders The approval percentage rate at small-business banks has increased one-half percent from one year ago. And it is up from 18.9% in June to 19.1% in July for this year. Non-bank lenders also enjoy higher approval rates.

Higher Approval Rates at Non-Bank Lenders

Non-bank lenders provide funding for women-owned and minority-owned businesses as they don’t solely focus on FICO scores. This according to Arora who also said these lenders focus, “…more on the financial health of the borrowers who are applying for funding.”

When it comes to these lenders, institutional lender approval was 23.9% in July. This is up two full percentage points from one year ago and one-tenth of a percent from 23.8% in June. Similarly, the rate for alternative lenders rose 0.2% from 24.5% in June to 24.7% of funding applications in July 2021. Same time last year, the approval for alternative lenders was 23.1%.

Credit unions, which specialize in addressing the need of small businesses, approved 20.5% of funding requests in July. This is the same rate as in June while being down almost a percentage point from last year’s 21.2%.

Small Business PPP Loans and the Opening of the Forgiveness Portal

Just last week the US Small Business Administration (SBA) opened its Paycheck Protection Program Direct Forgiveness Portal. This program was created to assist businesses in applying for loan forgiveness under the Paycheck Protection Program (PPP).

This is limited to loans of $150,000 or less, but the streamlining of this process is going to allow small business owners to quickly get a response for their applications.

The Biz2Credit Small Business Lending Index

The Biz2Credit Small Business Lending Index analyzes 1,000 loan applications on the Biz2Credit website every month. The index reports on the approval rates of small-business financing from different lenders. This includes Big Banks ($10 billion+ in assets), local and regional banks. It also provides information on non-bank lenders such as credit unions, Community Development Financial Institutions and micro-lenders.

Images: Biz2Credit

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