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

Small business leading

Biz2Credit Small Business Leading IndexTM

Small Business Loan Approval Rates at Banks dropped slightly in August 2020

Big Banks

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.

March 2020
15.4%
April 2020
8.9%

Monthly Comparison

April 2019
27.5%
April 2020
8.9%

Yearly Comparison

“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

Rohit Arora, Biz2Credit CEO

Small Banks

Small Banks

Small banks approved 18.5% of their funding requests, a small dip from 18.6% in July.

March 2020
38.9%
April 2020
11.8%

Monthly Comparison

April 2019
49.8%
April 2020
11.8%

Yearly Comparison

“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

Rohit Arora, Biz2Credit CEO

Institutional lenders

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.

March 2020
41.2%
April 2020
18.1%

Monthly Comparison

April 2019
65.3%
April 2020
18.1%

Yearly Comparison

“Institutional lenders saw only a slight gain,” Arora said. “Overall, it was a tough month for small business borrowers.”

Rohit Arora

Rohit Arora, Biz2Credit CEO

Alternative lenders

Alternative lenders

Loan approval rates among alternative lenders dropped a notch from 23.1% last month to 23.0% in August.

March 2020
30.4%
April 2020
15.2%

Monthly Comparison

April 2019
57.2%
April 2020
15.2%

Yearly Comparison

Credit unions

Credit unions

Credit unions also slipped one-tenth of a percent from 21.2% in July to 21.1% this month.

March 2020
23.2%
April 2020
18.1%

Monthly Comparison

April 2019
40.1%
April 2020
18.1%

Yearly Comparison

View Past Months

Access Archives

July 2020

Small Business Loan Approval Rates at Banks Rose in July 2020: Biz2Credit Small Business Lending Index™

Improvement in Approval Percentages at Banks and Institutional Lenders for Companies Applying for Non-PPP Loans, While Alternative Lenders and Credit Unions Slip

View Report
June 2020

Small Business Loan Approval Rates Rebounded in June 2020: Biz2Credit Small Business Lending Index™

Improvement in Approvals for Companies Applying for Non-CARES Act Loans

View Report
May 2020

Small Business Loan Approval Rates Rebounded in May 2020: Biz2Credit Small Business Lending Index™

Improvement in Approvals for Companies Applying for Non-CARES Act Loans

View Report
April 2020

Small Business Loan Approval Rates Dropped to Record Lows in April 2020: Biz2Credit Small Business Lending Index™

PPP Lending Dominates Small Business Lending, but Some Companies Applied for Non-CARES Act Funding

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.