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NEW YORK, Aug. 08, 2023 (GLOBE NEWSWIRE) — Small business loan approval percentages at big banks ($10 billion+ in assets) dropped from 13.4% in June to 13.3% in July, according to the latest Biz2Credit Small Business Lending Index™ released today. Big bank lending plummeted during the pandemic from a 28.3% approval rate in February 2020. The numbers slowly rebounded for over a year until July 2022. Since then, however, small business loan approvals have fallen steadily.
“There are several reasons for the recent decline in small business lending at big banks,” said Rohit Arora, CEO of Biz2Credit and one of the nation’s leading experts in small business finance. “Interest rates are up. Because big banks often made commercial real estate loans to small businesses, these deals have dried up with continuous interest rate increases from the Federal Reserve.”
“Additionally, regulators are looking to raise overall capital requirements at some of the largest banks by 2026. The banks are preparing for this now since many SMB loans carry 5-to-7-year terms,” Arora explained.
Meanwhile, small banks saw another approval percentage increase from 18.8% in June to 18.9% in July.
“Smaller banks do more government-backed SBA loans and have a heritage of working making business loans in their communities. Increasingly, these lenders are upgrading their technology to digitize the small business funding process, meaning they can serve more clients,” said Arora, a fintech pioneer who has led numerous technology partnerships with U.S. banks at Biz2Credit and Biz2X.
Non-bank lenders remain a good source of capital at this point. The approval rates of Institutional investors increased from 27.1% in June to 27.3% last month, while alternative lenders improved from 29.1% in June to 29.3% in July. The figures for these lenders have increased for nine consecutive months as borrowers have turned to them for money while bank lending remains tight.
“Alternative lenders are seeing more capital moved in their direction as investors, such as insurance companies, look for opportunities for higher yields against the backdrop of a new rate environment,” Arora said. “Thus, these alternative providers have capital available to fund small business requests for financing.”
Approval rates at credit unions again stalled at 19.9% in July. Similar to the situation with banks, credit unions are facing challenges in soliciting deposits, Arora said.
Total nonfarm payroll employment rose by 187,000 in July, and the unemployment rate changed little at 3.5%, according to the Jobs Report released by the U.S. Bureau of Labor Statistics on Friday, August 4, 2023. Job gains occurred in health care, social assistance, financial activities, and wholesale trade. 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 July 2023 Index, click here.
About Biz2Credit
Founded in 2007, Biz2Credit has arranged more than $7 billion in small business financing. The company is expanding its industry-leading technology in custom digital platform solutions for banks and other financial institutions, investors, and service providers. Visit www.biz2credit.com or Twitter @Biz2Credit, Facebook, and LinkedIn.
Contact: John Mooney, (908) 720-6057, john@overthemoonpr.com
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