In the midst of the government shutdown, business loan approvalsat credit unions have improved at one firm while banks haveexperienced a slight dip in lending activity.

Biz2Credit, a New York company that connects small business withlenders, discovered that scenario during its recent monthlyanalysis of 1,000 loan applications.

Banks were aggressive in small business lending during thefirst half of September at Biz2Credit and were on a path to anotherrecord month of approvals, said Biz2Credit CEO Rohit Arora.However, as the anxiety over the government shutdown began to rise,lending slowed.

“We expect the government shutdown to impact the figuresnegatively in the coming month, and the debt ceiling debate couldcripple small business lending even further,” Arora said.

Small business loan approvals at big banks with more than $10billion in assets dipped slightly to 17.5% in September from theall-time high of 17.6% in August 2013, according to the Biz2CreditSmall Business Lending Index.

Business loan approvals at banks with less than $10 billion inassets dropped to 50.1% from 50.7% in August.

At Biz2Credit, credit union lending improved slightly to 45.4% from 45.3% inSeptember. The firm said it is the third consecutive month ofincreases for credit unions after more than a year of steadydeclines.

Arora offered more consequences of the government shutdown. Amajor chunk of small business lending under the SBA andconventional loan programs require verification of transcripts bythe IRS, he explained. This has halted, and there will be a backlogof SBA loans once the impasse has settled.

“Cutting off small business borrowing takes the oxygen away fromsmall businesses, which create the lion's share of private sectorjobs in America,” Arora said. “This bad news comes at a fragiletime in the economic recovery following the Great Recession.”