Small business has been harshly hit by the pandemic, and the loan approval rates have been fallen for more than 50% since November 2019. The Paycheck Protection Program is also hit by the struggling economy. Securing capital from traditional sources have also become difficult.
Rohit Arora, a Senior Contributor to the Small Business Strategy, shares his views and says that the percentage of the small business loan approval at the big banks has fallen down to 13.2%. This is one of the strongest indications that the challenges faced by small business owners who need financing are growing rapidly.
There are several companies that are operating at a massive loss at the current times. These businesses are badly in need of capital but are discouraged from applying for funding as most of the loans are rejected. The economic uncertainty caused by the Novel Coronavirus has hampered this financial support.
Business owners are waiting anxiously, which is likely to provide forgivable loans that can help them survive the current surge of the pandemic. It is also possible that without significant federal assistance, small companies all over the world will struggle to survive, many of them will unfortunately collapse.
New Jersey is one of the hardest-hit places in the United States. A report stated that more than 30% of the small business in that state have closed which was not expected a year ago. Arora states that in the absence of a government stimulated package, more businesses in the near future will go down before the year reaches its end.
Also, with the increasing number of the virus affected casualties, the local governments across the countries are imposing tighter restrictions on business such as small restaurants and gyms. These restrictions will put great stress on the business, which is already facing struggles to survive.
One of the restaurant owners says that due to the lack of funds, they have to cut down the number of employees, as well as the hours of operation. They said, if the business gets the PPP2 money back, we will be able to work on the normal working hours instead of the reduced hours and will be able to generate more revenue
The credit unions are meanwhile approving 20.7% of the borrowers. In the past year, the credit unions have approved four out of ten funding requests. Additionally, the institutional lenders, last November, granted two-thirds of the funding applications; on the other hand, they are now granting about 22%. Similarly, some of the alternative lenders are approving about half of the funding proposals as compared to the last year.
Source – Forbes