Small Business Bank Loan Approval Rates Improve, New Data From Biz2Credit

There was an encouraging rebound in small business loan approval rates for banks and non-bank lenders in July. This is according to the recently released Biz2Credit Small Business Lending Index.

Approval rates show a 0.3% increase in approval percentage for small business loan applications at large banks. This increase in the approval rate does not include Paycheck Protection Program (P3) loans. It also only applies to large banks with $ 10 billion or more in assets.

Biz2Credit Loan Index July 2020

The approval rate for small business loans was 13.5% in June and rose to 13.8% last month. Small bank approval rates rose 0.2% to 18.6%, with approvals for large and small banks still well below February’s 50.3%.

Encouraging trend in approval rates for small businesses

While the rise in loan approval rates appears to be gradual, the upward movement is still encouraging for small businesses in the United States. Clearly, this is good news for small businesses that might need such loans to stay afloat. The number of customers and revenues are still down for many companies, but we hope that the upward trend will continue.

Further improvements in the labor market show that a slow recovery in economic activity continues. The health sector has seen a significant increase in employment. Notable job gains were also recorded in the leisure and hospitality, retail, business and professional services sectors. Many of these jobs have been created by small businesses which are clearly vital to the recovery of the economy.

Institutional lenders “go up regularly”

The monthly search for Biz2 Credit is overseen by their CEO and leading expert in small business lending, Rohit Arora, who commented: “There was clearly a slight uptick in the economy, especially in the northeast in July. Big banks have played a key role in PPP lending and are making more loans to their customers as some of them have used up their PPP funds.

“It will be interesting to follow the loans in the big banks as the coronavirus spreads in the southern and western regions of the country. “

Arora also said that regional and community banks are now making other types of loans available to new clients. Previously, they had made many PPP loans available to small businesses.

“Smaller banks are now in a good position to resume SBA 7 (a) lending and other funding requests,” Arora added. “Institutional lenders, like other types of lenders, have rebounded steadily from disastrous results in March and April. They continue to play an important role in small business loans.

Alternative lenders and credit unions continue to struggle

The increase in loan approval rates among large and small banks unfortunately contrasts with the rates among alternative lenders. They fell 0.3% between June and July. The loan approval rate for alternative lenders now stands at 23.1%.

Credit union approvals also edged down in July, approving 21.2% of loan applications. This is a decrease of 0.15% to return to the same approval rate of 21.2% as in May.