Small Business Loan Approval Rates at Banks Fell Again in September 2020: Biz2Credit Small Business Lending Index™
Small Businesses in Limbo Awaiting PPP Loan Forgiveness
Biz2Credit Small Business Leading IndexTM
Small Business Loan Approval Rates at Banks fell again in September 2020
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Big Banks
Small business loan approval percentages at big banks ($10 billion+ in assets) dropped slightly from 13.6% in August to 13.5% in September, indicative of the struggles that small businesses are facing, according to the latest Biz2Credit Small Business Lending Index™ released today. The Biz2Credit Small Business Lending Index figures do not reflect approval of Paycheck Protection Program (PPP) loans approved by the SBA and the Treasury. PPP lending ended on August 8 after providing nearly 5 million companies with $531 billion in what was expected to be “forgivable loans.” However, thus far, few borrowers have received confirmation that their PPP loans won’t have to be paid back. The U.S. Bureau of Labor Statistics’ Jobs Report on October 2 found that nonfarm payroll employment rose by 661,000 in September, and the unemployment rate declined to 7.9%. These improvements in the labor market reflect the resumption of economic activity that had been severely curtailed due to efforts to contain the coronavirus (COVID-19) pandemic. Job gains occurred in leisure and hospitality, in retail trade, in health care and social assistance, and in professional and business services, according to the Bureau of statistics. Many of those jobs are created by small businesses.
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“There’s no doubt that it has become a challenge to secure traditional small business funding in the coronavirus era,” said Biz2Credit CEO Rohit Arora, who oversees the monthly research. “Many companies are taking a wait-and-see approach until Congress passes so-called “PPP 2” legislation. Even if PPP 2 is enacted, business owners may not apply until they receive confirmation that their initial loans are forgiven.”
Rohit Arora, Biz2Credit CEO
Small Banks
During the month of September, small banks approved 18.5% of funding requests, unchanged from August.
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“It’s not reasonable to expect that firms will apply for funding before they find out whether they are on the hook for repaying their initial round of PPP funding,” added Arora, one of the nation’s leading experts in small business finance. “If they must repay loans they thought would be absolved by the government, they won’t look to borrow more. Unfortunately, many businesses are at a life-and-death stage right now if they do not get an infusion of capital.
Rohit Arora, Biz2Credit CEO
Institutional lenders
Two categories of lenders rose slightly. Institutional lenders saw an uptick in approval percentages from 22.0% in August to 22.2% in September
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Alternative lenders
Loan approval rates among alternative lenders increased one-tenth of a percent from 23.0% in August to 23.1% in September.
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Credit unions
Credit unions slipped one-tenth of a percent from 21.1% in August to 21.0% in September.
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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.