Small Business Loan Approval Rates Plummet in March 2020: Biz2Credit Small Business Lending Index™

All Categories of small business lenders nosedive as coronavirus wreaks havoc on the economy

Small business leading

Biz2Credit Small Business Leading IndexTM

Small Business Loan Approval Rates Plummet

Big Banks

Big Banks

The approval percentage for small business loan applications at big banks ($10 billion+ in assets) plummeted to just 15.4% from a post-recession high of 28.3% in February 2020, according to the Biz2Credit Small Business Lending Index™ released today. With business closures and layoffs due to coronavirus rattling the economy, numerous sectors in the economy have been shaken, including restaurants, hotels, airlines, and personal services. A remarkable 6.6 million Americans filed for unemployment during the week that ended March 28, according to the Bureau of Labor Statistics on Thursday, April 2. Further, According to the Jobs Report issued on Friday, April 3, 2020, significant declines occurred in restaurant/bar and travel industries, as well as health care and social assistance, professional and business services, retail trade, and construction. Implementation of the PPP program has been initially rocky. On the first day of the program, some of the biggest banks, such as Wells Fargo, were not ready to begin offering PPP loans. Further, although thousands of applications have been filed and approved, money still is not in the hands of business owners. Even willing lenders, such as community banks that process SBA loans, are finding it difficult to get cash to struggling businesses. “Government agencies aren’t accustomed to moving at breakneck speed,” Arora said. “The problem is that up to 75% of small businesses could go under if they don’t receive an injection of cash within the next 60 days.” Further complicating the issue is the enormous amount of information that small business owners are trying to grasp and process related to the program. For instance, on Thursday, April 2, the maximum interest rate that could be charged was reported at 0.5%, but by Friday morning, the Treasury Department had raised the rate to 1%. Information sites, such as SBADisasterLoans.info and CARESActSmallBusiness.info have sprung up to offer information about Small Business Administration (SBA) Economic Injury Disaster Loans (EIDL) and other types of funding for businesses in need of working capital during the coronavirus pandemic. Last week, Biz2Credit introduced Biz2X Accelerate SBA, that enables banks and other financial institutions to efficiently respond to the influx of loan requests from small businesses seeking to take advantage of the Paycheck Protection Program (PPP) of the historic CARES Act stimulus package.

Aug 2018
26.5%
Sep 2018
26.7%

Monthly Comparison

Aug 2018
26.5%
Sep 2018
26.7%

Yearly Comparison

“This is a stunning fall that was not entirely unexpected,” said Biz2Credit CEO Rohit Arora, who oversees the monthly research. “Until just a few weeks ago, the economy was very strong, and big banks were lending at unprecedented frequency. Now, obviously, things have changed dramatically.”

Rohit Arora

Rohit Arora, Biz2Credit CEO

Small Banks

Small Banks

The approval rate at small banks dropped dramatically by more than eleven percent, falling from 50.3% in February to 38.9% in March.”

Jul 2018
49.7%
Aug 2018
49.8%

Monthly Comparison

Aug 2017
49%
Aug 2018
49.8%

Yearly Comparison

“Smaller banks have been a good source of small business financing for a long time. While they are no longer approving more than they decline, business owners are reaching out to them because they are likely to provide funding through SBA loans,” Arora said. “As the economic crisis related to coronavirus continues, I believe smaller banks will lead the charge in helping companies get back on their feet. We have already seen that since community banks made such a strong showing on the first day of the CARES Act PPP lending program, while some big banks weren’t ready and have already reached their self-imposed lending limit.

Rohit Arora

Rohit Arora, Biz2Credit CEO

Institutional lenders

Institutional lenders

Institutional lenders’ approval percentages plummeted from 66.5% in February to 41.2% in March.

Jul 2018
64.8%
Aug 2018
64.9%

Monthly Comparison

Jul 2018
63.9%
Aug 2018
64.9%

Yearly Comparison

“Institutional lenders carved out significant strength in the small business lending marketplace over the past few years, but they are not immune to this market shock,” Arora said.

Rohit Arora

Rohit Arora, Biz2Credit CEO

Alternative lenders

Alternative lenders

Small business loan approval rates among alternative lenders fell from 55.9% in February to just 30.4% in March.

Jul 2018
56.5%
Aug 2018
56.6%

Monthly Comparison

Aug 2017
57.1%
Aug 2018
56.6%

Yearly Comparison

“Alternative lenders offer quick cash, so they will play a role in providing money to struggling companies” Arora said. “But those who can wait for government-backed loans will do so, because the interest rate under the PPP lending program is so low at 1%. Honestly, rates cannot go much lower than that, and some of the loans will be forgiven if businesses retain their workforces at pre-coronavirus levels.”

Rohit Arora

Rohit Arora, Biz2Credit CEO

Credit unions

Credit unions

The approval percentage rate for credit unions drop from what was already a record low of 39.6% in February to 23.2% in March.

Jul 2018
40.3%
Aug 2018
40.2%

Monthly Comparison

Aug 2017
40.3%
Aug 2018
40.2%

Yearly Comparison

“Credit unions had challenges in the business lending marketplace before the coronavirus came along,” said Arora. “With the speed that is required to pump some life into businesses right now, credit unions won’t be in the forefront of lenders. Those that have improved their digital capabilities or partnered with FinTech firms are well ahead of competitors – especially now.”

Rohit Arora

Rohit Arora, Biz2Credit CEO

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.