Small Business Bank Loan Approvals Dropped Dramatically in March: Biz2Credit Study
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Total nonfarm payroll employment rose by 236,000 in March, and the unemployment rate changed little at 3.5%, according to the Jobs Report released by the Bureau of Labor Statistics on Friday, April 7. Job gains continued in leisure and hospitality, government, professional and business services, and health care. Many of these jobs are created by small businesses.
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 March 2023 Index, click here.
“The collapse of Silicon Valley Bank (SVB) shook the confidence of small business owners. Many of them rushed to take their deposits out of small and midsize banks. That development hurt the banks’ ability to lend. Thus, it has become even harder for companies to secure capital,” said Rohit Arora, CEO of Biz2Credit, one of the nation’s leading experts in small business finance and fintech.
Arora noted that there was a big difference in the approval rates at banks during the first ten days before the Silicon Valley Bank (SVB) and Signature Bank collapses and the final days of March, when approvals plummeted as businesses pulled deposits from small and midsized banks.
“Even though the large majority of small businesses did not lose their deposits, their faith in the banking system became shaken,” Arora added. “Many SMBs moved their money out of smaller banks when they had amounts in excess of the $250,000 FDIC insurance threshold. They put their money into bigger banks.”
“Although small business owners won’t get the level of service at big banks that they received at smaller banks, they will choose safety over service every time,” he said. “While the worst fears of small business owners may not be warranted, their confidence in the banking system has not been fully restored -- and it may not return for a while. This hurts lending, and it is why small businesses are now experiencing a credit crunch.”
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.