Arizona ranked last nationally in small business loan approval

PHOENIX (3TV/CBS 5) — Small businesses are the heartbeat of any community and vital to the economy. But recent data from the U.S. Census Bureau has Arizona at the bottom nationally regarding small businesses getting approved for loans. For every 744 small business loan applications in Arizona, only one is approved.

“It’s scary because you don’t know,” The Paleta Bar Tempe co-owner Brandon Crespin said. Crespin is considering applying for a loan for his two Tempe popsicle bar locations. “Maybe you get lucky, you get a good interest rate,” he said. “Or you could get approved for only one loan but it has a high interest rate. You just don’t know.”

Thomas Barr of Local First Arizona, which helps small businesses navigate the growth process, says one of the challenges Arizona faces when it comes to loan approval is the small number of community banks. He says that’s because these smaller banks are more likely to offer loans and be invested in community activity than larger corporate ones.

“We have only 12 local banks in the entire state of Arizona,” Barr said. “Those large banks are usually looking for loans of $300,000 or more to finance. So if you’re a small business looking for a patio extension or a piece of equipment, we’re talking $25,000 to $250,000 dollars in a loan, you’re just not going to get that from many of the larger institutions.”

Barr says any relief small businesses got during the worst of the pandemic has likely run out. And while access to training resources has often continued, that’s more of a short-term solution to a long-term issue. “If you don’t have the actual dollars in capital to fund your business, then you’re still going to see that gap in growth,” he said.

Two new community banks have opened in the last year (Integro Bank and Scottsdale Community Bank), both of which Barr says is huge for small business loan opportunities. But Crespin is skeptical about what the state can do. “It’s shocking that Arizona is one of the worst,” Crespin said. “And it’s scary for me, because now I’m stuck here with two businesses.”

For small business owners looking for more resources and assistance, you can check out Local First Arizona’s website and banking information link.

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