Loan approval rates for small businesses are increasing slightly. The uptick in lending of non-PPP loans to small businesses was unveiled in the latest Biz2Credit Small Business Lending Index based on March 2021 figures. Since mid-January, Biz2Credit has been a leading processor of PPP applications in the US.
The amount of lending by big banks increased to 13.5% in March 2021. The increase is welcoming news for the small business community, as in February 2021, the figure stood at 13.3%. This was just a 0.1% rise from January 2021.
Small Business Lending Index – April 2021
However, the marginal increases in non Payment Protection Program (PPP) lending since the start of the year, contrast significantly its peak a year ago, when loan approval rates to small businesses from big banks stood at 28.3%.
Rohit Arora, CEO of Biz2Credit, and a leading expert in small business finance, commented on the findings: “Traditional big bank lending rose slightly in March, but small business loans are still much harder to obtain now than they were before the pandemic.
“Right now, banks have been focused on making Paycheck Protection Program (PPP) loans to small businesses. These loans are backed by the Treasury, so there is little risk to them,” Rohit added.
Alternative Lending Also on the Rise
Lending coming from sources other than big bank also increased slightly in March 2021. Approvals made by small banks climbed by a notch from 18.2% in February 2021 to 18.3% in March. This however is hugely divergent to March 2020, when small bank approved 38.9% of small business loan applications.
A similar situation is found among credit union lending, which climbed from 20.3% approval rates in February to 20.4% in March 2021. A year ago, credit union approved 23.2% of the applications made by small businesses for loans.
Alternative lending also increased by one-tenth of a percent in March from 23.8% in February to 23.9% in March 2021.
Positive Signs in the Labor Market
The slight increase in the lending of non-PPP loans to small businesses is coupled with positive news regarding the labor market. Biz2Credit’s report points to data from the Bureau of Labor Statistics, which shows that nonfarm payroll employment rose by 916,000 in March 2021.
Unemployment is also down, as according to figures released by the Bureau of Labor Statistics on April 2, 2021, the unemployment rate in the US fell to 6%. Many of the jobs have been created by small businesses, with the leisure and hospitality sector leading the way in job growth.
The statistics show that the economy is starting to pick up in the US and small businesses are showing signs of recovery. However, in terms of sourcing finance, the report confirms that PPP lending still dominates small business lending. With the number of non-PPP loan approvals still significantly lower than before the pandemic, small businesses are still facing challenges when it comes to securing finance.