Online lenders will see a surge in business lending as Paycheck Protection Program ends

According to the last Biz2Credit Small Business Loan Index released in June. However, small bank approvals jumped from 18.2% in April to 18.7% in May.

“Small bank loan approvals rose 0.3% as banks begin to assess the favorable economic conditions that are beginning to emerge as lockdowns ease and more people receive a vaccine against covid-19,” the CEO of Biz2Credit said. Rohit Arora, one of the nation’s leading small business finance experts. “Pent-up consumer demand is an appealing narrative that small business owners can use as part of their rationale for seeking funding. Banks, especially smaller community and regional institutions, are noticing this trend as they begin to open their lending operations to the post-pandemic reality.

Next month’s lending numbers will be important now that the federal government’s Paycheck Protection Program (PPP) has completed its second cycle.

“Businesses that are still reeling from the economic impact of the pandemic will need to seek other sources of funding,” Arora explained. “Look for business loans – especially loans from online or digital providers – to see an increase in activity now that the PPP is closed.”

Total non-farm payroll employment increased by 559,000 in May and the unemployment rate fell 0.3% to 5.8%, the US Bureau of Labor Statistics reported Friday, June 4. and in health care and social assistance. Many of these jobs are created by small businesses.

Credit unions went from an approval rate of 20.3% in April to 20.4% in May 2021. However, other non-bank lenders increased slightly. Institutional lenders approved 23.6% of funding requests in May, up slightly from 23.5% in April.

Meanwhile, alternative lenders approved 24.3% of funding requests in May 2021, compared to 24.0% in April.

“Alternative lenders saw a significant increase in approval rates in May while processing ever-increasing numbers of loan applications, thanks to the shift to online financing in the small business space,” Arora said. “With the conclusion of the PPP, the banks are focused on forgiveness and may not be ready to increase lending to small businesses that are not government backed.”

“Borrowers will need to look to non-bank sources of finance, including alternative lenders, institutional lenders and credit unions,” he added. “These lenders are all starting to meet demand, and many will see their approval ratings increase as customers who used to get loans from a bank now turn to other sources of funding.”

Biz2Credit analyzed loan applications from businesses that had been 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 the Biz2Credit platform.

  • Francis Bignel

    Francis is a junior journalist with a BA in Classical Civilization, he has a specialized interest in North and South America.

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