Small business loan approval rates at banks fell in August 2020. Figures from the Biz2Credit Small Business Lending Index show a small drop in such approvals in August. The data indicates that the rising number of small businesses acquiring loans from May onwards has plateaued.
In August 2020, big banks, with $10 billion-plus in assets, granted just 13.6% of the loan applications they received. This compares to 13.8% in July. A similar dip can be found in the number of small banks approving loans. In August, 18.5% of small banks approved funding requests. This was marginally down from an 18.6% approval rate in July.
Biz2Credit Lending Index – August 2020
The Biz2Credit Small Business Lending Index figures do not show the approval rates of Paycheck Protection Program (PPP) loans. These loans are made by the government rather than the banks.
PPP lending ended on August 8, 2020 after providing almost five million small businesses with a cash injection.
Securing traditional loans hasn’t been easy during Covid-19. Biz2Credit’s Index shows the number of small businesses securing bank loans is diminishing.
PPP leading proved a vital lifeline for many small businesses. A survey by Paychex found that 64% of businesses applying for PPP loans found success. For many small businesses, the ending of the PPP will come as a blow.
Businesses Still Not Operating at Full Capacity
Biz2Credit’s CEO Rohit Arora commented on the current lending climate for small businesses. “PPP loans came to a halt on August 8, and it has been tough to secure traditional small business funding in the coronavirus era. Big banks hit a record low approval rate of 8.9% in April and were slowly rebounding, but the curve flattened last month.
“The discouraging part is that the trend over the past several months had been positive. Now it seems to have leveled off. It’s a wait-and-see attitude – especially when some businesses are not yet operating at full capacity,” Arora added.
Biz2Credit is an online credit resource which offers finance to small businesses. Biz2Credit’s Small Business Lending Index analyses loan requests from businesses that have been in operation for more than two years. The results are based on data of over 1,000 small businesses that applied for funding on the Biz2Credit’s platform.
In such uncertain times, it is important small businesses are up to date about the funding available to them.
Small Businesses Hope for PPP2 Legislation to be Passed
Now that the PPP program has ended, many small businesses are hoping Congress will pass legislation for a PPP2 program. The legislation would help small businesses secure much-needed funding. Such funding could prove vital at a time when Covid-19 disruption is still rife and bank lending is leveling off.