Credit unions are at an all-time low, and big banks lending to small businesses has flatlined for more than a year, according to Biz2Credit and its periodic small business lending index.
Big banks, those with $10 billion or more in assets, fell from 13.3% in July to 13.2% in August. Credit unions are at an all-time low of 19.8% in August, down 0.1% from 19.9% in July.
Small banks with assets under $10 billion are doing better at providing credit to smaller firms.
Regional and community banks are seeing increases, rising from 18.9% in July to 19.1% in August. Biz2Credit points out that the figures are far below what it was pre-pandemic, noting that in February 2019, small banks granted more than half (50.3%) of their business funding requests.
The approval rates of Institutional investors also rose from 27.3% in July to 27.4% in August, while alternative lenders rose to 29.5% from 29.3%.
“If you are a small business looking for funding, you will have a difficult time securing it from big banks. We have seen it for more than a year,” says Rohit Arora, CEO of Biz2Credit. Arora threw some shade at big banks because they hold so much in deposits.
As for smaller banks, they have less money to lend as depositers are putting their money elsewhere like in T-Bills or money market accounts.
Arora added that the branch system built by banks are expensive to maintain, predicting they will continue to shrink as banking continues to go digital.” it’s not going back,” he said.
