Small Business Loan Approvals Slid at Big Banks, Rose at Other Lenders in September: Biz2Credit Small Business Lending Index™
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Total nonfarm payroll employment rose by 336,000 in September, and the unemployment rate was unchanged at 3.8%, according to Jobs Report released by the U.S. Bureau of Labor Statistics on Friday, Oct. 6. Job gains occurred in leisure and hospitality; government; health care; professional, scientific, and technical services; and social assistance. 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 September 2023 Index, click here.
“Securing a small business loan from a big bank is certainly challenging, and I don’t see that changing much in the coming months,” said Rohit Arora, CEO of Biz2Credit, and one of the nation’s leading experts in small business finance. “Your chances of obtaining small business financing from a regional or community bank are much higher.”
“Many big banks are restructuring. They are closing branches and laying off people. I expect that they will continue to shrink,” added Arora, a pioneer in fintech. “Overall, they prefer to do bigger deals involving larger amounts of money rather than focus on small business loans.”
“Lending at regional and community banks has slowly but surely been increasing,” Arora said. “Smaller banks process a lot of government-backed SBA loans, which reduce their exposure to risk. A lot of these banks have been digitizing their business loan application process, which makes SBA lending even more attractive to them.”
“Non-bank alternative lenders remain the most reliable sources of capital for small businesses, despite the higher rates of interest that they charge,” Arora said. “For many businesses, the cost of capital is not the determining factor. Rather, speed and the higher likelihood of a positive response are what’s most important.”
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.