Business loan approval rates drop 50% in past year

Small business loan approvals at big banks are down 50% from last year’s figures, according to data from Biz2Credit Index of Small Business Loans. Loan approvals from large banks with more than $ 10 billion in assets were 13.2% in November this year, compared to 28.1% for the same period.

Big bank loan approvals fell for the second month in a row with an approval rate of 13.3% in October to 13.2% in November, indicating difficulties for small business owners to find financing.

Likewise, loan applications from small banks fell slightly to 18.3% in November this year from 18.4% the month before. Small banks accounted for the largest loan approvals with more than 50.5% of financing to small businesses in November.

Biz2Credit Loan Index – December 2020

Other findings of the index include:

• Credit unions slipped two tenths of a percent to an approval rate of 20.7% in November from 20.9% in October.
• In November 2019, credit unions approved almost 40% of the applications they received.
• Institutional lenders, as well as loan approvals from alternative lenders, however, increased slightly. Institutional lenders approved 22.6% of financing requests in November, up slightly from 22.5% in October. While those of alternative lenders edged up from 23.3% in October to 23.4% in November.
• Last year in November, institutional lenders approved nearly two-thirds (66.1%) of their funding requests. And alternative lenders granted 56.3% of their requests.

Growing fears of rejection of candidates

The drop in loan approvals follows an increase of 245,000 non-farm jobs in November. The unemployment rate edged down to 6.7%, down 3.2% from the peak of 8% recorded by COVID-19. Job creation in transportation and warehousing is on the rise as holiday gifts hit stores and consumers. Employment also improved in professional and business services and health care.

“Even though many businesses are currently operating at a loss and need capital, they are discouraged from applying for funding because of the likelihood or rejection as approval rates drop and because there are so many economic uncertainty caused by the coronavirus, ”said Rohit Arora. , CEO of Biz2Credit.

Image: Biz2Credit