According to the Biz2Credit Small Business Lending Index, approvals for small business loans with large banks are down 50% year over year. Credit approvals from major banks with assets of more than $ 10 billion were 13.2% in November of this year, compared with 28.1% in the same period.
Big bank loan approvals declined for the second consecutive month, with approval rates from 13.3% in October to 13.2% in November, indicating challenges for small business owners in raising finance.
Likewise, loan applications from small banks fell slightly in November this year to 18.3% compared to 18.4% in the previous month. Small banks received the largest loan approvals, accounting for more than 50.5% of small business funding in November.
Biz2Credit Lending Index – December 2020
Further results of the index are:
- Credit unions fell two tenths of a percent from 20.9% in October to an approval rate of 20.7% in November.
- In November 2019, the credit unions approved nearly 40% of the applications received.
- However, institutional lenders and alternative lender approvals increased slightly. Institutional lenders approved 22.6% of funding requests in November, up from 22.5% in October. While those from alternative lenders rose slightly from 23.3% in October to 23.4% in November.
- In November last year, institutional lenders approved nearly two-thirds (66.1%) of their funding requests. And alternative lenders approved 56.3% of their applications.
Growing fears of applications being rejected
The decline in loan approval follows the non-agricultural workforce, which rose by 245,000 in November. The unemployment rate fell to 6.7%, 3.2% from the 8% high of COVID-19. Transportation and storage jobs are growing as Christmas gifts make their way to stores and consumers. Employment in professional and business services and healthcare also improved.
“While many companies are currently operating at a loss and in need of capital, the likelihood or rejection of declining approval rates and the economic uncertainty caused by the coronavirus are holding them back from applying for funding,” said Rohit Arora, CEO of Biz2Credit.