Banks Pulled Back on Small Business Lending Before the Shutdownby
Lenders say the government shutdown hasn’t yet blocked the pipeline for loans backed by the Small Business Administration. Many banks are still processing loans, with the expectation that the agency will grant necessary approvals when it resumes full function. Some familiar with the complicated process of SBA loan approvals say the shutdown could stymy small business borrowers in the weeks to come.
It also appears that worries about the shutdown shook bankers who make different types of small business loans: With the shutdown looming, banks approved such loans at slightly lower rates in September than in the previous month, according to a monthly measure by Biz2Credit, which matches borrowers with lenders.
Banks with $10 billion or more in assets approved 17.5 percent of loans, down one-tenth of a percentage point from August, according to Biz2Credit. Business owners can apply for loans through Biz2Credit’s website, which makes the company’s survey of more than 1,000 loan applications a window on the small business credit market. In August, big banks approved small business loans at the highest rate since Biz2Credit starting compiling its lending index in January 2011, the company says. Approval rates at smaller banks fell to 50.1 percent in September from 50.7 percent in August.
While those are small decreases, banks were poised to boost approvals before the anxiety over the looming shutdown set in, says Biz2Credit’s chief executive, Rohit Arora. “Banks were aggressive in small business lending during the first half of September and were on a path to another record month of approvals,” he says in a statement. “We expect the government shutdown to impact the figures negatively in the coming month, and the debt ceiling debate could cripple small business lending even further.”
Approval rates at credit unions and alternative lenders ticked up to 45.4 percent and 63.2 percent in September, according to Biz2Credit.