Small Business Lending Provides Banks and Credit Unions with Expanding Opportunities Post-COVID

New lending programs show small business support and commitment to community

Even as COVID support programs for small businesses close up shop, banks and credit unions are taking their best practices from 2020 lending programs – like SBA and PPP – and activating them in the post-pandemic era. As it turns out, business lending is big business, during an economic contraction and a recovery, alike. With the economy flush with cash and concerns over credit and payback easing, financial institutions now have a unique opportunity to customize their products and services for a post-COVID economy and support small businesses and the local economy at the same time.

Tracking credit union business lending, CU Times says, “First and foremost, 2020 was a blockbuster year for credit union business lending and there appears to be no easing in 2021…” In fact, NCUA data finds that the “number of commercial loans funded by credit unions compared to 2019 was up by 12% with the dollar amount of commercial loans funded last year up by 22%.” No small shakes, especially for community FIs reasserting their role in communities. CU Times says, “The most exciting trend for credit unions now and for the next few years will be the resurgence of local small businesses.”

The need for community economic support from banking is still strong. American Banker’s BankThink describes how essential small business lending is for recovery: “During the height of the pandemic, the PPP offered a unique blend between private banking and government support. Bankers were working overtime to save small businesses, sometimes approving loans at their dinner tables and through drive-thru windows.” But while the program sunsets, “[m]any businesses will soon see their PPP loan amounts exhausted but have not yet experienced a return to normal in terms of their volume of business.”

Continuing loan growth as the pandemic impacts ease, Forbes’ reporting on bank business lending finds: “Small business loan approval percentages at big banks ($10 billion+ in assets) climbed slightly from 13.5% in May to 13.6% and small banks’ approvals rose from 18.7% in May to 18.9%, in June 2021, according to the latest Biz2Credit Small Business Lending Index.” Pre-COVID, smaller FIs didn’t have an optimized lending process, but “now that the PPP is over, they may again be able to help them by providing traditional term loans and SBA loans.”

Taken together, most economic indicators are pointing to economic recovery in the short term and financial resilience in the long term – which is good news for banks betting big on business. Forbes finds: “There are other signs that the recovery is well on its way. According to a report by The Wall Street Journal, new businesses are sprouting at the fastest pace on record. The rate at which workers are quitting their jobs – a sign of confidence in the labor market – is the highest since 2000.”

Stay tuned as Believe in Banking continues to provide news and insights on the industry’s latest developments and how banking is putting purpose into practice by continuing to meet the financial needs of their communities.