March 8, 2022
SBA Hot Topic Tuesday – Small Businesses Seek Banks More Often for Financial Services
The Small Business Credit Survey released by the Federal Reserve Banks finds that small business financing approval rates have continued to decline since the start of the pandemic, and the businesses that did apply for financing were not as likely to obtain the financing they were searching for.
Here is the data:
•In 2021, 77% of small businesses with employees sought financial assistance, and 66% of those small businesses received funding.
•The number one reason that an employer firm did not seek financial assistance in 2021 was that they did not think their business would qualify.
•More than a third (36%) of the small businesses in the survey did not need any funding.
•The EIDL program was one of the most popular options for pandemic-related financial assistance with almost half (48%) of small businesses with employees seeking an EIDL loan. Also, 31% of these small businesses applied for an EIDL advance.
•47% of employer firms applied for a PPP loan.
•Small businesses with employees were far less likely to apply for a PPP loan in 2021 with 6% applying in 2021 only and 36% applying in 2020 only.
•90% of small businesses sought large banks or small banks as financial services providers.
•The most common source of financing that small businesses looked for were loans and lines of credit. For these small businesses, SBA loans or lines of credit were the most popular option.
•Approval rates for different financing options have declined since 2019. Applicants are 17% less likely to receive at least partial approval from financing companies, 29% less likely from online lenders, 8% less likely from small banks, and 14% less likely from large banks.
•Small businesses that applied for financing were the most satisfied with lenders from small banks (76% satisfied). This is followed by large banks (62% satisfied), finance companies (46% satisfied), and online lenders (42% satisfied).