Where to look if banks reject your small business loan application
Where to look if banks reject your small business loan application

Small business loan approval percentages in large banks (over $10 billion in assets) fell from 13.6% in June 2021 to 13.8% in July, the same percentage as a year ago, according to the latest Biz2Credit Small Business Lending Index™. The approval percentage at major banks is about half of what it was at the start of 2020 before the COVID pandemic hit.

Overall, the economy has rebounded quite well and many small businesses are investing in their businesses again. Approval rates have increased in both large and small banks, including regional and community banks which are increasingly partnership with FinTechs to digitize the small business loan application process. Approvals from small banks also increased, from 18.9% in June to 19.1% in July. However, in early 2020, smaller banks approved more than half of their loan applications.

The big banks remain relatively stingy in their lending to small businesses. This opens up opportunities for smaller banks and other lenders to gain market share. Meanwhile, some small business owners are still able to take advantage of government programs, even after the Paycheck Protection Program PPP loans closed in May.

Last week, the SBA announced that eligible applicants for the Shuttered Venue Operators Grant (SVOG) seeking economic assistance for small live entertainment businesses, nonprofits, and venues can submit new applications for funding until 11:59 p.m. Friday, August 20, 2021. The SVOG program has so far awarded $8.4 billion in grants to more than 10,800 companies to help get cultural institutions across the country back on track, which are essential to the economy and were among the first to close.

While the YOUR application portal will close to new applicants, the SBA will continue to provide economic assistance to help sites recover by providing critical relief through the Supplemental Rewards Program. Later this month, the SBA will open the additional SVOG program for 50% of the initial scholarship amount, capped at a total of $10 million (initial and additional combined). Details will be announced at a later date.

Additionally, to ensure that no eligible location is left behind, the SBA is currently accepting, by invitation, requests for reconsideration of scholarship amounts and appeals. This rare opportunity gives applicants the chance to prove their eligibility and reverse a previous decision.

“The closed site operator grant has been our lifeline. The grant allowed us to resume operations, including staffing and programming,” said Michael Moran, President and CEO of The Palace, a theater in Stamford, CT. “At the beginning of 2020, we had planned to close only three or four weeks. As the pandemic continued to worsen, our fears of never reopening also grew. The Palace has closed for 15 months as expenses continue to pile up amid bleak revenue prospects. The SVOG grant through the SBA saved us and can be credited with not only our recovery, but that of the entire Stamford Theater District.

Non-bank lenders

Institutional lenders approved at 23.9% in July, up a tenth of a percent from 23.8% of funding requests in June and up a full two percentage points from a year ago. a year. Meanwhile, approved alternative lenders increased by two tenths of a percent, from 24.5% in June to 24.7% of funding requests in July 2021. Last year, the July percentage for lenders alternatives was 23.1%. Credit unions approved 20.5% in July, the same percentage as the previous month, but down from 21.2% last year in July 2020.

Non-bank lenders are a viable source of capital for small business owners, including women- and minority-owned businesses. Why? Non-bank lenders typically focus less on FICO scores and more on the financial health of borrowers applying for financing.

Accion, a nonprofit microlender, has a long history of helping small businesses, especially minority-owned businesses. Accion provides loans through its Opportunity Fund, which has a proven track record of supporting a diverse clientele. The organization’s small business borrowers are nearly 90% women, people of color or immigrants. Over the past 25 years, the lender has put more than $500 million in the hands of business owners.

During the pandemic, small business owners have learned to look at many different sources of capital, including government assistance programs and non-bank lenders, as banks have been slow to push traditional term loans to small businesses. companies. The key is not to be pigeonholed into approaching one type of lender, especially if approval rates are low. Do your research and look for new funding opportunities.

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