Business Loan Approvals at Big Banks and Credit Unions Continued to Slide in August: Biz2Credit Small Business Lending Index™
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Total nonfarm payroll employment increased by 187,000 in August, and the unemployment rate rose to 3.8%, according to Jobs Report released by the U.S. Bureau of Labor Statistics on Friday, Sept. 1. Employment continued to trend up in health care, leisure and hospitality, social assistance, and construction. Employment in transportation and warehousing declined. Many of these jobs are created by small business.
To determine its Small Business Lending Index, Biz2Credit analyzed loan requests from companies in operation for more than two years with credit scores above 680. The results are based on primary data submitted by more than 1,000 small business owners who applied for funding on Biz2Credit's platform. To view the August 2023 Index, click here.
“If you are a small business looking for funding, you will have a difficult time securing it from big banks. We have seen it for more than a year,” said Rohit Arora, CEO of Biz2Credit, and one of the nation’s leading experts in small business finance. “Big banks always had deposit money on hand. They always thought of it as permanent cheap capital. Now the interest rates are higher.”
“Further, the branch systems that big banks built are expensive to maintain, and I expect that they will shrink. Banking has increasingly gone digital, especially post-COVID, and it’s not going back,” added Arora, a pioneer in fintech.
“Following the collapse of SVB and other mid-sized banks, we increasingly see depositors taking money out of banks and putting it into U.S. Treasuries, money market accounts, and elsewhere. They have less money available to lend,” Arora said.
“In recent years, smaller banks became more active in commercial real estate loans and did not see the bottom falling out in the commercial real estate market,” he explained. “I suspect we will see downsizing and forced acquisitions in the coming months. Many mid-sized banks have high exposure in commercial real estate. This situation can only hurt small business lending.”
“Institutional investors and other non-bank alternative lenders remain frequent sources of capital for small businesses, although the interest rates they charge are typically higher than the rates of bank loans,” Arora said.
The Report
About Biz2Credit Small Business Lending Index™
The Biz2Credit Small Business Lending Index™ 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 Index™ 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.
