Small business loan approval rates grew slightly between June and July, leaving them at the same percentage as they were this time in 2020, data from Biz2Credit’s Small Business Lending Index shows. Small bank approval rates also improved from 18.9 percent to 19.1 percent over the period, but that marks a one-half of one percent improvement from one year ago.
“Overall, the economy has rebounded fairly well, and many small businesses are again investing in their companies,” said Biz2Credit CEO Rohit Arora. “Approval rates increased both at big banks and at smaller banks, including regional and community banks that increasingly are partnering with FinTechs to digitize the small business loan application process.
“Big banks remain comparatively stingy in their small business loan-making. This is opening up opportunities for smaller banks and alternative lenders to gain market share.”
According to the U.S. Bureau of Labor Statistics total non-farm payroll employment rose by 943,000 in July, and the unemployment rate declined by 0.5 percentage point to 5.4 per cent, driven by gains in leisure and hospitality along with professional and business services.
Institutional lender approval rates rose to 23.9 per cent in July, up one-tenth of a per cent from June and up two full percentage points from one year ago. Alternative lender approvals rose two-tenths of a percent from 24.5 per cent in June to 24.7 per cent in. In 2020 the July percentage for alternative lenders was 23.1 per cent. Credit unions approved 20.5 per cent in July, the same percentage as the month prior, but down from 21.2 per cent in July 2020.
“Non-banks lenders are a viable source of capital for small business owners, including women-owned and minority-owned businesses,” Arora said. “Non-bank lenders typically focus less on FICO scores and more on the financial health of the borrowers who are applying for funding.”
Biz2Credit analyzed loan requests from companies in business more than two years old 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.