Small business bank approvals fell dramatically in March: Biz2Credit study

Small business approval rates at major banks fell again, falling from 14.2% in February to 13.8% in March, according to the latest Biz2Credit Small Business Lending Index™ released today. This figure is the lowest figure for large banks since July 2021.

Meanwhile, the approval rate for small bank business loan applications also fell more than two percentage points from February’s figure of 21.3% to 19.1% in March.

As bank lending to small businesses declined, approvals at non-bank lenders increased in each of the categories monitored by the Biz2Credit Index.

Alternative lenders climbed to 28.4% in March, up from 27.9% in February.
Institutional investors granted 26.5% of funding requests, up from 26.3% in February.
Credit unions reversed a yearlong decline in approval rates by increasing to 20.2% in March from 20.0% in February.

“The collapse of Silicon Valley Bank (SVB) shook the confidence of small business owners. Many of them rushed to withdraw their deposits from small and medium-sized banks. That development hurt the banks’ ability to lend. Thus, it has become even more difficult for companies to secure capital,” said Rohit Arora, CEO of Biz2Credit, one of the country’s leading experts in small business finance and fintech.

Arora noted that there was a big difference in bank approval rates in the first ten days before the collapse of Silicon Valley Bank (SVB) and Signature Bank and the last few days of March, when approvals fell as companies withdrew deposits from small and medium-sized banks .

“Although the vast majority of small businesses did not lose their deposits, their faith in the banking system was shaken,” Arora added. “Many SMBs moved their money out of smaller banks when they had amounts above the $250,000 FDIC insurance threshold. They put their money in larger banks.”

“While small business owners will not get the level of service at large banks that they received at smaller banks, they will choose security over service every time,” he said. “While the worst fears of small business owners may not be justified, their confidence in the banking system has not been fully restored – and it may not return for some time. This hurts lending, which is why small businesses are now experiencing a credit crunch. »

Total nonfarm payroll employment rose by 236,000 in March, and the unemployment rate was little changed at 3.5%, according to the Jobs Report released by the Bureau of Labor Statistics on Friday, March 7. April. business services and health services. Many of these jobs are created by small businesses.

To determine its Small Business Lending Index, Biz2Credit analyzed loan requests from companies in business for more than two years with credit scores above 680. The results are based on primary data submitted by more than 1,000 small business owners who applied for financing on Biz2Credit’s platform.