Small Business Loan Approval Rates at Banks Fell in August 2020: Biz2Credit Small Business Lending Index™
Slight Declines in Approval Percentages at Alternative Lenders and Credit Unions
Biz2Credit Small Business Leading IndexTM
Small Business Loan Approval Rates at Banks dropped slightly in August 2020
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Big Banks
Small business loan approval percentages at big banks ($10 billion+ in assets) and small banks dropped slightly in August 2020, reversing an upward trend that begin in May, according to the Biz2Credit Small Business Lending Index™ released today. In August, big banks granted only 13.6% of the loan applications they received, compared to 13.8% in July. The figures do not reflect approval of Paycheck Protection Program (PPP) loans, which are made by the government, rather than by the banks themselves. PPP lending ended on August 8 after providing nearly 5 million small businesses with an infusion of much needed cash, which ultimately will be “forgivable loans” in most cases. Now that the program has ended, many small business owners are hoping that Congress will pass anticipated PPP2 legislation thought would help continue the flow of capital to America’s small businesses. The U.S. Bureau of Labor Statistics’ Jobs Report on September 4 found that nonfarm payroll employment rose by 1.4 million in August, and the unemployment rate fell to 8.4%. These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus pandemic and efforts to contain it. Notable job gains in the private sector occurred in retail trade, in professional and business services, in leisure and hospitality, and in education and health services. Many of those jobs are created by small businesses.
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“PPP loans came to a halt on August 8, and it has been tough to secure more traditional small business loans in the coronavirus era,” said Biz2Credit CEO Rohit Arora, who oversees the monthly research. “The big banks hit a record low approval percentage of 8.9% in April but had been rebounding. In August, the upward trend reversed.”
Rohit Arora, Biz2Credit CEO
Small Banks
Small banks approved 18.5% of their funding requests, a small dip from 18.6% in July.
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“While the slides are small, the discouraging part is that the trend over the past several months has been positive,” added Arora, one of the nation’s leading experts in small business lending. “It’s a setback.”
Rohit Arora, Biz2Credit CEO
Institutional lenders
Institutional lenders were the only category of lender that saw an uptick in approval percentages during August, as approvals rose from 21.9% in July, up from 22.0% in August.
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“Institutional lenders saw only a slight gain,” Arora said. “Overall, it was a tough month for small business borrowers.”
Rohit Arora, Biz2Credit CEO
Alternative lenders
Loan approval rates among alternative lenders dropped a notch from 23.1% last month to 23.0% in August.
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Credit unions
Credit unions also slipped one-tenth of a percent from 21.2% in July to 21.1% this month.
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View Past Months
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| February 2021 |
Biz2Credit Small Business Lending Index™ Finds Loan Approval Rates in February 2021 Changed Little from January, But Dropped Dramatically from February 2020 |
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As Small Business Businesses Apply for PPP Funding, Approval Percentages for Traditional Loans Plummet |
| View Report |
| January 2021 |
Biz2Credit Small Business Lending Index™ Reports Loan Approval Rates at Banks Increased Slightly in January 2021, But Are Down More Than 50% from One Year Ago |
| View Report |
| December 2020 |
Biz2Credit Small Business Lending Index™ Reports Loan Approval Rates at Banks Declined in December 2020, Are Down More Than 50 Percent from One Year Ago |
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Approval percentages for all categories of lenders dropped more than 50% from December 2019 |
| View Report |
| November 2020 |
Biz2Credit Small Business Lending Index™ Reports Loan Approval Rates at Banks Declined in November 2020, Are Down More Than 50 Percent from One Year Ago |
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Approval percentages are down 50% or more for all categories of small business lenders as the pandemic surges |
| View Report |
About Biz2Credit Small Business Lending IndexTM
The Biz2Credit Small Business Lending IndexTM is an analysis of 1,000 monthly loan applications on the Biz2Credit website. The Index reports the loan approval rates of small business financing requests at Big Banks ($10 billion+ in assets), local and regional banks and non-bank lenders (credit unions, Community Development Financial Institutions (CDFI), micro lenders, and others).
Unlike other surveys, the results are based on primary data submitted by more than 1,000 entrepreneurs who applied for funding on Biz2Credit's online lending platform, which connects small business borrowers with sources of capital.
Results of the Biz2Credit Small Business Lending IndexTM have been reported by The Wall Street Journal, Bloomberg BusinessWeek, Entrepreneur.com, Bloomberg Radio's "The Hays Advantage", SBA Radio, NY Daily News, Crain's NY Business, Michigan Banker, and other media.