November 15, 2021
Main Street Monday – Loan Delinquency Rates Have Been Low During the COVID Recession
“The Office of Advocacy’s bi-annual Economic Bulletin examines new data on how small businesses have recovered since the peak of the COVID-19 pandemic,” reads the November Economic Bulletin. “COVID-19 sparked the shortest recession in U.S. history. Importantly, banking and finance indicators were muted compared to the Great Recession.”
Here are the key takeaways about financing:
• Bank lending standards reached a high peak in 2020 but have been decreasing in 2021.
• After increasing in early 2020, the number of banks reporting stronger demand for small business loans decreased later in the year. Towards the very end of 2020, demand took a sharp increase and has continued rising through 2021.
• Small business loans and total business loans increased in 2020 and are starting to regulate to pre-pandemic levels.
• Loan delinquency rates for commercial and industrial loans and commercial real estate loans during the 2020 recession were insignificant, especially in comparison to the Great Recession and recovering years. Bank losses from small business loans are minimal.
• The number of loan applications per bank remained steady until the beginning of the pandemic. Loan applications reached a peak and then decreased after the first round of PPP. The number of loan applications once again grew towards the end of 2020 and the start of round two PPP.
• Loan approval rates roughly followed the highs and lows of the number of loan applications banks were receiving. The loan approval rate is now at around pre-recession rates.