The U.S. government shutdown in October had a significant negative impact on small business lending, according to the\u00a0Biz2Credit Small Business Lending Index. The Index is\u00a0a monthly analysis of 1,000 loan applications. Small business loan approval rates were down at traditional banks and credit union lenders. \u00a0Just how much they were down depends on the size and type of lender: At big banks -- those with $10 billion+ in assets -- small-business loan approvals dropped by 20% to 14.3%\u00a0in October 2013. Small banks also approved fewer loans. \u00a0Approval rates at\u00a0small banks\u00a0dropped from 50.1% in September to\u00a044.3%. \u00a0That is\u00a0the lowest figure that Biz2Credit's Index has recorded for small banks since August 2011. Even\u00a0credit unions, which had been on the lending rebound prior to the government shutdown, experienced a 4% decrease in approval rates in October, dropping to\u00a043.4%. \u201cSBA loan approvals stalled because the agency was closed for three weeks.\u00a0 Similarly, non-SBA loans could not be processed during the government shutdown because the IRS was not operating.\u00a0 Banks could not acquire income verification from the IRS during the shutdown, which is needed to approve many loan requests,\u201d said Biz2Credit CEO Rohit Arora, who oversaw the research. \u201cA major backlog of SBA loans from the shutdown will take months to process, and the debt ceiling debate could negatively impact small business lending even further in the coming months,\u201d added Arora, who is one of the nation's top experts in small business finance. Alternative Lenders Spot an Opportunity Meanwhile,\u00a0alternative lenders\u00a0seized the opportunity and picked up the slack in small business lending.\u00a0 Approval rates by alternative lenders increased to an Index high\u00a067.3%\u00a0in October 2013, up from 63.2%\u00a0the previous month. Alternative lenders include factoring companies which advance money against invoices owed to the business, \u00a0credit card receivables companies, cash advance, \u00a0ACH lenders (also called "payday" or same-day lenders) and other nontraditional sources of capital to small businesses. \u201cSmall business owners desperate for capital during the shutdown turned to alternative lenders, who were willing and able to provide money, but at a much higher interest rate than a bank or credit union would charge,\u201d explained Arora.\u00a0 "The stop in the flow of capital came at a time of year when small businesses traditionally search for funding.\u00a0 The economy, which is still in the weak recovery phase, simply cannot sustain this kind of disruption." In other words, it cost some small businesses more money, because of where they had to turn for capital instead. Arora expects that small business loan approval rates and fundings will climb in November as the banking industry recovers from the shockwave of the government shutdown. Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business more than two years with an average credit score above 680.\u00a0 Unlike other surveys, the results are based on primary data submitted by more than 1,000 small business owners who applied for funding on Biz2Credit\u2019s online lending platform, which connects business borrowers with more than 1,200 lenders nationwide. View the historic chart of the\u00a0Biz2Credit Small Business Lending Index, for details.