“Although the U.S. Small Business Administration (SBA) was closed for most of January due to the government shutdown, the percentage of SBA loan approvals dropped by just one percent last month (January) at regional and community banks, which process a sizable percentage of the government-backed loans.”
During the same period, approval rates of small business loans at big banks remained at record highs of 27%.
Non-bank and alternative lenders were able to fill this small gap left by SBA closure, providing loans to business owners who were in need of quick capital but unable to get money from traditional sources. Loan approval rates of alternative lenders increased to 57.3% while credit union approvals rose to 40.3%.
According to SBA New York District director Beth Goldberg, the SBA processed more than 1,100 7(a) loans amounting to half a billion dollars during the first week following the shutdown. Her office also guaranteed more than 200 loans amounting to $59.3 million since reopening of the SBA on January 28. The overall economy is already performing well on many levels which is beneficial to the small business lending sector.
The Federal Reserve has decided not to raise interest rates and the Jobs Report released on February 1 found an unexpected increase in job creation. Given the situation, small business owners are advised to start applying for SBA loans and also to consider applying for traditional bank loans to take advantage of friendly rates.