July numbers reported an increase in small business loan approval rates at big banks (i.e. banks holding more than $10B in assets). Approval rates of 13.5% in June rose to 13.8% in July, marking the first increase since January of 2020 when big bank loan approval rates soared at 28.3%.
This increase was mirrored in loan approval rates at small banks as well, which rose from 18.4% in June to 18.6% in July. This was a continued bump from 16.9% in May, but still remains well below the 50.3% mark that small business loan approval rates at small banks hit back in February of this year.
It is important to note that these loans were separate from the widely distributed government PPP loans that many businesses successfully applied for and received earlier in the year.
The widespread increase in bank loan approvals throughout July was accompanied by a continued decrease in the unemployment rate, bringing it to 10.2%. Unemployment had peaked in April at 14.7% and has continued to fall month-over-month since. July alone added 1.8 million nonfarm jobs as economic activity that had been restricted due to COVID resumed, especially in the areas of leisure, hospitality, retail, professional services, and health care.
These indicators may be a sign of an economic rebound on the horizon.
In fact, Rohit Arora, one of the nation’s top experts in small business lending, was quoted as saying, “There was clearly an uptick in the economy, especially in the northeast in July. The big banks played a key role in PPP lending and are making other loans to their customers as some of them have exhausted their PPP funds.” Arora also indicated that small banks are now in a better place to offer additional types of funding aside from the PPP loans that they had been inundated with earlier in the year.
This data is very encouraging as small businesses across the country look towards the remainder of the year with at least some measure of apprehension.
If you have been holding out on getting a loan, now may be the time apply. Talk to your business banker about what the best option would be for your specific business circumstances, especially if you have already received a PPP loan. If you do not have an established relationship with a bank loan officer, lean on an experienced accounting company to provide guidance on who they would recommend working with to secure business financing.
For more information on how an accountant consultant can assist during a downturn in the market, visit our article How Can an Accountant Help During a Recession.
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