Biz2Credit August data suggests shutdown inflicted damage

Rohit Arora

Rohit Arora

Biz2Credit’s August report suggests the Small Business Administration’s temporary July shutdown had an impact on small business borrowing.

The monthly study is based on data generated from the platform’s analysis of loan requests for amounts between $25,000 and $3 million made by companies in business for at least two years and which possess an average credit score above 680.

While there was a demonstrated effect from the shutdown, it seems to be temporary, Biz2Credit’s CEO believes.

“We were disappointed to see that the SBA’s temporary shutdown in July scared some customers away from loans, a factor that hurt big and small banks,” Rohit Arora said. “Luckily, the drop was not massive and our analysis showed the march of customers towards more online channels is accelerating as the economy picks up and small business owners enter into the year-end busy season.”

Biz2Credit logoBiz2Credit’s Small Business Lending Index score for big and small banks dropped by 0.1 points last month, largely due to the July shutdown, the company believes.

Credit union activity declined, with institutional lenders picking up the slack. The institutional approval rate of 61.8 percent was the highest rate among lending categories, a hair above the 61.0 percent rate posted by alternative lenders. The report says alternative lenders approval percentages have declined since the beginning of 2014, which is when institutional lenders began participating in the space.

“Alternative lenders like traditional MCA players are seeing continued customer acquisition as well as pricing challenges,” Mr. Arora explained. “Institutional lenders as a class of investors is growing the fastest as more long-term funding is entering the small business lending space. Institutional lenders are also getting into commercial real estate (CRE) and equipment financing within the small business lending landscape.”

Big banks, defined in the report as those with at least $10 billion in assets, approved 22.3 percent of small business loan requests, down one tenth of a point from July’s 22.4 pace.

The small bank approval rate also dropped a tenth, and now sits at 49.1 percent, making August the tenth consecutive month the segment has denied more than half of submitted loan requests.

Credit unions continued the losing a tenth trend. Their August approval rate sat at 42.8 percent.

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