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

Biz2Credit, a New York company that connects small business with lenders, discovered that scenario during its recent monthly analysis of 1,000 loan applications.

Banks were aggressive in small business lending during the first half of September at Biz2Credit and were on a path to another record 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 figures negatively in the coming month, and the debt ceiling debate could cripple small business lending even further,” Arora said.

Small business loan approvals at big banks with more than $10 billion in assets dipped slightly to 17.5% in September from the all-time high of 17.6% in August 2013, according to the Biz2Credit Small Business Lending Index. 

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

At Biz2Credit, credit union lending improved slightly to 45.4% from 45.3% in September. The firm said it is the third consecutive month of increases for credit unions after more than a year of steady declines. 

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

“Cutting off small business borrowing takes the oxygen away from small businesses, which create the lion’s share of private sector jobs in America,” Arora said. “This bad news comes at a fragile time in the economic recovery following the Great Recession.”