"Credit unions had challenges in the business lending marketplace before the coronavirus came along," Biz2Credit CEO Rohit Arora, who oversees the monthly research, said. "With the speed that is required to pump some life into businesses right now, credit unions won't be in the forefront of lenders. The credit unions that have improved their digital capabilities or partnered with fintech firms are well ahead of competitors – especially now."

The approval rate among small banks dropped dramatically as well, falling from 50.3% in February to 38.9% in March.

"Smaller banks have been a good source of business financing for a long time," he said. "While they are no longer approving more than they decline, business owners are reaching out to them because they are likely to provide funding through SBA loans."

As the economic crisis related to the coronavirus continues, Arora said he believes smaller banks will lead the charge in helping companies get back on their feet.

"We have already seen that since community banks made such a strong showing on the first day of the CARES Act PPP lending program, while some big banks weren't ready and have already reached their self-imposed lending limit," he said.

The approval percentage for small business loan applications at big banks that manage more than $10 billion in assets dropped sharply to just 15.4% from a post-recession high of 28.3% in February 2020.

"This is a stunning fall that was not entirely unexpected," Arora said. "Until just a few weeks ago, the economy was very strong, and big banks were lending at unprecedented frequency. Now, obviously, things have changed."

What's more, institutional lenders' approval percentages plunged from 66.5% in February to 41.2% in March.

"Institutional lenders carved out significant strength in the small business lending marketplace over the past few years, but they are not immune to this market shock," Arora said.

Additionally, small business loan approval rates among alternative lenders fell from 55.9% in February to just 30.4% in March.

"Alternative lenders offer quick cash, so they will play a role in providing money to struggling companies," Arora said. "But those who can wait for government-backed loans will do so, because the interest rate under the PPP lending program is so low at 1%. Honestly, rates cannot go much lower than that, and some of the loans will be forgiven if businesses retain their workforces at pre-coronavirus levels."

Implementation of the CARES Act PPP program has been initially rocky. On the first day of the program, some of the biggest banks, such as Wells Fargo, were not ready to begin offering PPP loans. Further, although thousands of applications have been filed and approved, money still is not in the hands of business owners.

Even willing lenders, such as community banks that process SBA loans, are finding it difficult to get cash to struggling businesses.

"Government agencies aren't accustomed to moving at breakneck speed," Arora said. "The problem is that up to 75% of small businesses could go under if they don't receive an injection of cash within the next 60 days."

Further complicating the issue is the enormous amount of information that small business owners are trying to understand and process related to the PPP program. For instance, on April 2, the maximum interest rate that could be charged was reported at 0.5%, but by Friday morning, the Treasury Department had raised the rate to 1%.

Biz2Credit is an online small business lending firm based in New York.