According to the most recent Biz2Credit Small-Business Lending Index(tm), the approval rates for small business loans at large banks ($10 billion+) increased from 13.6% to 13.8% in June 2021 to 13.8% by July. This is the same percentage as last year. About half of the approval rate at large banks is now, compared to what it was in early 2020 before the COVID pandemic.
The economy is doing well overall, and small businesses are investing again in their businesses. Both big banks and smaller banks saw approval rates rise, as did those of community and regional banks. FinTechs are increasingly partnering with banks to digitize small-business loan applications. Approvals by small banks also increased from 18.9% in June, to 19.1% in July. However, more than half of all loan requests were approved by small banks at the beginning of 2020.
The big banks are still incredibly stingy when it comes to small business loans. This opens up market opportunities for small banks and other lenders. Even though Paycheck Protection Program PPP lending ended in May, small business owners still have the ability to benefit from government programs.
The SBA announced last week that applicants for the Shuttered Venue Operators Grants (SVOG), which provide economic assistance to live entertainment small businesses, non-profits, and venues, can submit new funding requests until Friday, August 20, 2021 at 11:59 p.m. To help the nation’s cultural institutions which are vital to the economy, and among the first to go bankrupt, the SVOG program has already awarded grants totaling $8.4 Billion to more than 10800 businesses.
The SVOG application portal will be closed to new applicants. However, the SBA will continue to provide economic assistance to venues to recover through the supplemental awards program. The SBA will offer supplemental SVOGs at 50% of the initial award amount. This is in addition to a cap of $10 million for both the initial and supplemental. More details will be revealed at a later time.
The SBA accepts by invitation applications for reconsideration and appeals of award amounts or appeals to make sure that no venue is excluded. This rare opportunity allows applicants to prove their eligibility or reverse an earlier decision.
“The Shuttered Venues Operator Grant was our lifeline. The grant allowed us to go back to full operation, including programming and staffing,” said Michael Moran, president of The Palace in Stamford CT. Our fears of never opening again grew as the pandemic deteriorated. The Palace was closed for 15 months. Despite the fact that expenses were increasing and bleak revenue prospects, it was shut down. We were saved by the SVOG grant from the SBA and it can be credited for not only our recovery, but also that of Stamford’s entire theater district.
In July, institutional lenders approved 23.9% of funding requests. This is one-tenth of one percent more than June’s 23.8% and two full percentage points higher than one year ago. Alternative lenders approved increased by two-tenths of percent, from 24.5% in June and 24.7% in July 2021. The July percentage of alternative lenders was 23.1% last year. Credit unions approved 20.5% in August, the same as last month, but lower than 21.2% in July 2020.
Small business owners can find capital from non-bank lenders, which are available to women-owned and minority-owned companies. Why? Why?
Accion, a microlender non-profit, has a long track record of supporting small businesses, especially minority-owned ones. Accion offers loans through its Opportunity Fund. This fund has a track record of supporting diverse clients. Nearly 90% of small business borrowers at Accion are women, immigrants, and people of color. Over $500 million has been given to business owners by the lender over the last 25 years.
Small business owners learned to explore other sources of capital during the pandemic. These included government assistance programs as well as non-bank lenders. Banks have been slow to offer traditional small business term loans. It is important not to be restricted by one lender, especially when approval rates are low. Do your research to find funding opportunities.