Small business loan approval rates have rebounded in May to 11.5% up from 8.9% in April according to a Biz2Credit Report . Indicating an up...
Small business loan approval rates have rebounded in May to 11.5% up from 8.9% in April according to a Biz2Credit Report. Indicating an uptick of approval rates among big banks ($10 billion + assets) for small businesses as the coronavirus cases are going down.
Biz2Credit Lending Index May 2020
Loan approval rate among small banks also improved with the figure climbing to 16.9% in May from April’s dismal 11.8%. Similarly, institutional lenders and credit unions too saw a bounce back. Approval percentages for institutional lenders’ reached 21.4% from 18.1% in April while credit unions saw their figures reaching 21.2% from 18.1% during the same period.
However, the figure is still far below the record high February figures pre-coronavirus pandemic which was a healthy 50.3%. February’s record loan approval percentage for small businesses at big banks had followed January’s 28.3% record high. May’s figures also show a 30 plus percentile decline from the same period last year which was around 49.9%.
“Toward the end of May, the economy began to rebound from the beating it took at the hands of the coronavirus lockdown. Unemployment dropped from April’s Depression era-levels. Many economic factors are fluctuating tremendously since 2020 began”, said Biz2Credit CEO Rohit Arora.
These rates do not reflect Payroll Protection Program (PPP) loan approval rates. This is because they are under the purview of the government, rather than banks. But some smaller banks do process many PPP loan requests, but still, receive non-PPP applications.
Is the Economy on a Comeback?
The U-turn from the figures in April is an early indication of the economy possibly rebounding. In addition to the improved loan approval ratings, PPP is helping businesses to stay open.
PPP’s average loan size is $113,228 and 5,458 lenders are participating in the program.
According to a recent National Federation of Independent Businesses (NFIB) survey, PPP loans, which are administered by the SBA, have had a largely positive impact on small businesses. In it, around three-quarters of eligible businesses have applied for a PPP loan, and 93% of those received one.
To date, the PPP lending program has provided more than 4.5 million small businesses well over $510 billion in potentially forgivable loans, directly ensuring 50 million American workers keep their jobs, according to the Small Business Administration.
The Labor Market
The labor market is seeing improvement as well. According to May figures from the Bureau of Labor Statistics, the number of unemployed people had fallen by 2.1 million to reach 21.0 million. The unemployment rate also declined by 1.4% reaching 13.3% in May.
The average workweek for all employees on private nonfarm payrolls increased by 0.5 hours to 34.7 hours in May. In manufacturing, the workweek rose by 0.8 hours to 38.9 hours, and overtime increased by 0.3 hours to 2.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.6 hours to 34.1 hours.
The number of unemployed persons who were on temporary layoff decreased by 2.7 million in May to 15.3 million. This is following a sharp increase of 16.2 million in April. According to Biz2Credit these improvements in the labor market reflect a limited resumption of economic activity that was curtailed in March and April due to the coronavirus pandemic. The month of May has seen jobs rising in leisure and hospitality, construction, education and health services, and retail trade. However, government employment continued to decline sharply the report has cited.
“Small businesses drive much of the economy’s growth and new job creation. It’s a positive sign to see employment ?gures rise so sharply in May,” said Arora.
Image: Biz2Credit
This article, "Small Business Loan Approval Rates Rebound from Record Lows" was first published on Small Business Trends
from Small Business Trends https://ift.tt/2MW7bs7
