Approval rates for small business loans at banks fell in August 2020. Figures from the Biz2Credit Small Business Loan Index show a slight drop in such approvals in August. The data indicates that the growing number of small businesses acquiring loans from May has plateaued.
In August 2020, the big banks, with more than $10 billion in assets, only granted 13.6% of the loan applications they received. This compares to 13.8% in July. A similar decline can be seen in the number of smaller banks approving loans. In August, 18.5% of small banks approved funding requests. This is down slightly from the approval rating of 18.6% in July.
Biz2Credit Loan Index – August 2020
Figures from the Biz2Credit Small Business Lending Index do not show approval rates for Paycheck Protection Program (PPP) loans. These loans are made by the government rather than the banks.
PPP loans ended on August 8, 2020 after providing nearly five million small businesses with a cash injection.
Securing traditional loans has not been easy during Covid-19. Biz2Credit’s index shows that the number of small businesses getting bank loans is decreasing.
PPP leadership has proven to be a vital lifeline for many small businesses. A Paychex survey found that 64% of businesses applying for PPP loans were successful. For many small businesses, the end of PPP will be a blow.
Businesses still not operating at full capacity
Biz2Credit CEO Rohit Arora commented on the current lending climate for small businesses. “PPP lending stopped on August 8, and it has been difficult to get traditional financing for small businesses in the age of coronavirus. Big banks hit a record approval rate of 8.9% in April and slowly rebounded, but the curve flattened last month.
“What is discouraging is that the trend over the last few months has been positive. Now it seems to have stabilized. It is a wait-and-see attitude, especially when some businesses are not yet operating at full capacity,” Arora added.
Biz2Credit is an online credit resource that provides financing for small businesses. Biz2Credit’s Small Business Loan Index analyzes loan applications from businesses that have been in business for more than two years. The results are based on data from over 1,000 small businesses that have applied for financing on Biz2Credit’s platform.
In these uncertain times, it is important for small businesses to be aware of the financing available to them.
Small businesses hope PPP2 legislation will pass
Now that the PPP program is over, many small businesses are hoping that Congress will pass legislation for a PPP2 program. The legislation would help small businesses get much-needed financing. Such funding could prove vital at a time when the Covid-19 disruptions are still rife and bank lending is stabilizing.
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