63 Powerful Small Business Loan & Lending Statistics & Trends

If you’re a small business owner, you know that securing funding can be a challenge. Small business loans are a common way for entrepreneurs to get the financing they need to grow their businesses.

According to USA Today, small businesses still make up 99.9% of all U.S. firms, and over 33.3 million small businesses exist currently.

Of this number, only 48% meet their financing needs, and a shocking 43% apply for loans yearly.

In this article, I discuss 63 current small business loan statistics to help you understand and make informed decisions about your financing options and increase your chances of securing the funding you need to succeed.

1. 33.3 million small businesses exist in the U.S, employing more than 61.6 million people.

(Source: Nerd Wallet)

Small businesses are essential to the economy because they provide jobs, drive innovation, and stimulate growth. They also offer unique products and services that larger enterprises may not provide.

If you are considering starting a small business, you should know you are not alone. There are millions of people just like you who are pursuing their entrepreneurial dreams.

Small businesses come in many different shapes and sizes. They can be anything from a one-person operation to a company with hundreds of employees. They can also be found in various industries, including retail, healthcare, construction, and technology.

No matter your business type, you are part of a thriving community that positively impacts the economy.

2. 48% of small businesses meet their financing needs, with 20% getting loans and 28% having insufficient capital without a loan.

(Source: Fundera)

Understanding the industry’s current state regarding small business financing is essential.

The consequences can be dire for the 52% of small businesses that cannot secure the financing they need.

Small businesses may struggle to hire employees, purchase inventory, or invest in marketing and advertising without sufficient capital. This can make it difficult to compete with larger companies and ultimately lead to failure.

Small business owners should know these statistics and explore all available financing options.

There are ways to secure the capital needed to grow and succeed, whether by applying for a loan, seeking out investors, or exploring alternative financing options.

3. About 43% of small businesses apply for a loan yearly.

(Source: Fed Small Business)

If you’re a small business owner, you may wonder how common it is for businesses like yours to apply for loans.

It’s important to note that not all small businesses will be approved for loans. In fact, according to some statistics, only about 32% of minor business applicants turned to online lenders last year.

However, this doesn’t mean you shouldn’t apply if you need the funding. Many different types of loans are available for small businesses, and it’s worth exploring your options to find the best fit for your needs.

It’s essential to clearly understand your business’s financial situation when applying for a loan.

This includes your credit score, annual revenue, and any outstanding debts. Presenting a clear and accurate picture of your business’s finances will increase your chances of being approved for a loan.

4. Of all US businesses that opt for a traditional bank loan, 43% turn to large banks, 36% to small banks, and 23% to online lenders.

(Source: Forbes)

Large banks have traditionally been the go-to for businesses seeking loans. They typically offer a wide range of financial products and services, a strong reputation, and brand recognition.

On the other hand, small banks may offer more personalized service and a deeper understanding of the local market.

Online lenders have emerged as viable alternatives to traditional banks in recent years. They offer convenience and speed, allowing customers to apply for a loan online and receive funding quickly.

However, it’s important to note that online lenders may have higher interest rates than traditional banks.

5. 82% of small businesses fail due to cash flow problems, 42% due to a lack of market, 29% run out of cash, 23% due to a mismatched team, and 19% because of competition winning.

(Source: Business Insider)

Cash flow problems are the most common reason why small businesses fail. This can be due to a lack of funding, poor budgeting, or insufficient sales to cover expenses.

Understanding your business’s financial situation and having a plan to address any cash flow issues is essential.

Lack of market demand is another common reason small businesses fail. Before starting a business, it’s essential to conduct market research and ensure that there is a demand for your product or service.

This can help you avoid investing time and resources into a business that may not be successful in the long run.

Running out of cash is another common reason small businesses fail. Having a solid financial plan and monitoring your cash flow is essential to avoid this.

A mismatched team can also contribute to small business failure. It is important to have a team that is well-suited to your business and its goals, with members with the necessary skills and experience to help your business succeed.

Finally, competition winning is another common reason why small businesses fail. It’s essential to conduct competitive research and plan to differentiate your company from competitors in the market.

6. Most US business owners spend their loans on growing their businesses, with 42.4% naming it as one of their top three uses. Buying equipment was the second most popular choice (29.4%), and 28.6% mentioned using the loan for marketing and advertising expenses.

(Source: Forbes)

When small business owners seek out loans, they often have a specific purpose in mind. Overall, it is clear that they are using loans to invest in their businesses and drive growth.

Using loans strategically, they can make essential investments in equipment, marketing, and other areas that can help them succeed in today’s competitive business environment.

7. The average short-term loan from a traditional bank (not under the SBA scheme) is $20,000, and a medium-term loan is $110,000.

(Source: Nerd Wallet)

Short-term loans typically have a repayment term of less than one year, while medium-term loans have a repayment term of one to five years.

The amount you can borrow will depend on various factors, including your credit score, business revenue, and the purpose of the loan.

It’s important to note that these averages are for loans not under the SBA scheme. SBA loans have different terms and requirements and may be a good option for some small businesses.

When applying for a traditional bank loan, prepare a solid business plan and financial statements for the lender. This will increase your chances of being approved for a loan and getting the funding your business needs to grow.

8. The average FICO score for business owners (loan applicants and not) is 721.

(Source: FinImpact)

One of the most important factors for lenders regarding small business loans is the borrower’s creditworthiness.

For business owners, this is typically measured by their FICO score, which ranges from 300 to 850. Higher scores indicate better creditworthiness.

If you’re a business owner looking to apply for a small business loan, it’s essential to understand how lenders will evaluate your FICO score.

Generally, a higher FICO score will increase your chances of being approved for a loan and getting favorable terms, such as a lower interest rate. On the other hand, a lower score may make it more challenging to get approved or result in less favorable loan terms.

9. 35% of white-owned applicant firms get all the financing they seek compared to 16% of Black-owned firms, 15% of Asian-owned firms, and 19% of Hispanic-owned firms.

(Source: FinImpact)

When it comes to small business lending, there are significant disparities between different racial and ethnic groups.

These disparities are concerning, as they suggest that small business lending is not equally accessible to all groups. It is important to note that these disparities are not due to differences in creditworthiness or the quality of business plans.

Instead, they are the result of systemic biases and discrimination that have historically disadvantaged minority-owned businesses.

To address these disparities, policymakers and lenders must work together to create more equitable lending practices. This could include expanding access to capital for minority-owned businesses, increasing transparency and accountability in lending decisions, and providing targeted support and resources for underserved communities.

By taking proactive steps to address these disparities, we can help ensure that all small businesses have the resources they need to succeed and thrive.

10. Large, nonlocal banks are responsible for 89.5% of smaller loans (less than $100,000) given to small businesses.

(Source: Zippia)

This means that if you are looking for a loan of less than $100,000, you are more likely to get approved by a large, nonlocal bank than a small bank.

It is important to note that while large, nonlocal banks may be more likely to approve your loan, they may also have higher interest rates and stricter repayment terms.

It is always a good idea to shop around and compare loan offers from multiple lenders before deciding.

If you are considering applying for a large, nonlocal bank loan, research and read the fine print. Look for hidden fees or penalties, and ensure you understand the repayment terms before signing on the dotted line.

11. 44% of small business owners have less than three months’ cash reserves in case of an emergency.

(Source: Goldman Sachs)

This lack of cash reserves can endanger businesses and employees in financial emergencies.

Small business owners must have enough cash reserves to cover at least three months’ expenses. This can help businesses survive tough times and avoid taking on too much debt.

One way to build up cash reserves is to create and stick to a budget. Tracking income and expenses can help you identify areas where you can cut costs and increase revenue.

Another way to build up cash reserves is to apply for a small business loan. Many lenders offer loans to small businesses that can be used to cover expenses during tough times. However, it is essential to carefully consider the loan terms and ensure that you can afford to make the payments.

12. 70% of all small United States businesses have outstanding debt.

(Source: Zippia)

If you are a small business owner in the United States, you likely have some form of outstanding debt. This includes loans, credit card debt, and other forms of financing.

While carrying debt can be stressful, it is essential to remember that it is a normal part of running a business. Many businesses use debt as financing to help grow their operations.

However, managing your debt responsibly and making timely payments is essential to avoid damaging your credit score.

13. 38% of small businesses owe less than $100,000, with 17% owing under $25,000, and 21% between $25,000 and $100,000.

(Source: Tech Report)

Regarding small business lending, it’s important to note that not all businesses are created equal. While these numbers may seem small compared to larger loans, they can still significantly impact a small business’s financial health.

Small business owners should consider their borrowing needs and repayment abilities before taking on any debt.

One way to manage debt is to create a detailed budget that includes expenses and income. By understanding your business’s financial situation, you can make informed decisions about borrowing and repayment.

Additionally, it is essential to shop around for the best loan terms and interest rates, as different lenders may offer other options.

14. 38% of all small businesses took out a loan in 2020 to expand.

(Source: Zippia)

However, it’s important to note that this number is down from 58% in 2019, which may be attributed to the impact of the COVID-19 pandemic on small businesses.

Taking out a loan to expand your business can be a great way to invest in your company’s growth. However, it’s essential to understand the risks and benefits before deciding.

It is also essential to have a solid plan for using the loan funds. Whether expanding your physical location, investing in new equipment, or hiring additional staff, having a clear plan can help ensure you’re making the most of your investment.

15. 52% of firms with more than $1 million in annual revenues receive all the financing they apply for, compared to 24% with $1 million or less.

(Source: FinImpact)

Smaller businesses may face more challenges securing the funding they need to grow and thrive.

If you are a small business owner with limited resources, it is essential to understand the challenges you may face when seeking financing. However, you can take steps to improve your chances of getting approved.

For example, you may want to consider working with a lender that specializes in small business loans or seeking out alternative funding sources such as crowdfunding or grants.

In addition, it is critical to have a solid business plan that clearly outlines your goals, strategies, and financial projections. Lenders want to see that you clearly understand your business and plan to use the funds you receive.

By taking these steps and being proactive in your approach to financing, you can increase your chances of success and help your business reach its full potential.

16. The average rates for business loans vary between 2.54% to 7.01%.

(Source: Small Business Administration)

It’s important to note that interest rates can vary depending on the type of loan you’re applying for, the lender, and your creditworthiness.

To ensure that you get the best interest rate possible, it’s essential to have a good credit score, a solid business plan, and a clear understanding of your financial needs. It would be best if you also were prepared to negotiate with lenders to get the best possible terms.

When choosing a lender, you should consider other factors, such as repayment terms, fees, collateral requirements, and interest rates.

Researching and comparing different options can help you find a loan that meets your needs and helps your business grow.

17. The SBA business loan approval rate is estimated at 52%.

(Source: Tech Report)

If you’re a small business owner looking for financing options, you may consider a loan backed by the U.S. Small Business Administration (SBA).

While this may seem like a low percentage, it’s essential to understand that SBA loans are often considered more complex financing.

The SBA has strict eligibility requirements, and lenders must follow specific guidelines when processing SBA loan applications.

A solid business plan, a good credit score, and a robust financial history are essential to increase your chances of being approved for an SBA loan. It would be best if you also were prepared to provide detailed financial statements and other documentation to support your loan application.

It’s also worth noting that while the SBA loan approval rate may be lower than other types of loans, SBA loans often offer more favorable terms, such as lower interest rates and more extended repayment periods.

18. SBA loans have a 49% approval rate at small banks.

(Source: Federal Reserve Bank of Kansas City)

If you apply for an SBA loan at a small bank, you have a higher chance of getting approved than at a large bank. This could be because small banks are more familiar with the local market and may better understand the needs of small businesses in their area.

It is important to note that while SBA loans have a higher approval rate at small banks, they are not guaranteed. You will still need to meet the eligibility requirements and provide the necessary documentation to apply for an SBA loan.

However, if you are looking for a loan and have been turned down by a large bank, it may be worth considering applying at a small bank that offers SBA loans.

19. SBA loans only have a 25% approval rate at large banks.

(Source: Swoop Funding)

If you apply for an SBA loan at a large bank, there is a 75% chance that your application will be denied.

So, why do SBA loans have such a low approval rate at large banks? One reason is that large banks tend to have stricter lending criteria than smaller banks or alternative lenders.

They may require a higher credit score, more collateral, and a more extended business history than other lenders. Additionally, large banks may not have as much experience working with small businesses, making it more difficult to assess risk accurately.

If you are considering applying for an SBA loan, exploring other options besides large banks may be worth exploring.

Small banks and credit unions have a much higher approval rate for SBA loans. Additionally, alternative lenders and online lenders may be able to offer more flexible lending criteria and faster approval times.

20. The average small business loan amount is $633,000.

(Source: Indeed)

This number can vary depending on the type of loan and the lender you choose. National banks tend to issue the most significant loans, while online lenders and alternative financing options may offer smaller loan amounts.

It’s important to note that while $633,000 may be the average loan amount, not all small businesses need or qualify for this much funding.

Evaluating your business’s financial needs and applying for a loan appropriate for your specific situation is crucial.

21. The average loan amount from large national banks is $593,000.

(Source: Blooma)

However, it’s important to note that this is just an average. Depending on your business’s financial situation, credit history, and other factors, you may be approved for a loan that’s significantly higher or lower than this amount.

When applying for a loan from a large national bank, you’ll typically need to provide significant documentation to support your application.

This might include financial statements, tax returns, and other records demonstrating your business’s economic health and ability to repay the loan.

22. The average SBA loan is $417,316, while the maximum is $5 million.

(Source: Capital Bank)

It’s important to note that this is just an average, and your loan amount may be higher or lower depending on various factors.

The SBA does have a maximum loan amount of $5 million, so if you require a larger loan, you may want to consider other options.

Remember that SBA loans are typically used for specific purposes, such as purchasing equipment, real estate, or working capital. If you’re looking for a loan for a different purpose, you may need to explore other options.

23. In fiscal year 2023, the SBA issued nearly $34 billion to business owners across the U.S with more than 63,000 loans.

(Source: Small Business Administration)

The SBA offers a range of loan programs to help small businesses access the capital they need to start, grow, and expand their operations.

These loans are provided through banks, credit unions, and other lenders. Still, they are guaranteed by the SBA, which reduces lenders’ risk and makes it easier for small businesses to qualify for funding.

In fiscal year 2023, the SBA issued loans to various businesses owned by women, minorities, and veterans.

While around a third of the loans went to businesses with female ownership, most loans went to companies owned by white and Asian business owners.

24. The SBA distributed over 14 million loans worth $764 billion in 2020 alone, of which $736 billion were COVID-19 relief loans.

(Source: Chamber of Commerce)

The SBA’s COVID-19 relief loans were a lifeline for many small businesses struggling to stay afloat during the pandemic. These loans were designed to help enterprises pay for payroll, rent, and utilities.

The loans were also forgivable if the funds were used for eligible expenses and the business met specific criteria.

The SBA’s loan programs have existed for decades, but the COVID-19 pandemic highlighted their importance to small businesses. The SBA’s loans can help enterprises access the capital they need to grow and thrive.

In fact, according to the SBA, small businesses create two out of every three new jobs in the United States, so supporting small businesses is critical to the economy as a whole.

25. Black (47%) and Hispanic (44%) business owners were more likely to be denied loans compared to white (34%) and Asian (32%) business owners.

(Source: Small Business Administration)

You may face challenges when obtaining a loan as a small business owner. Unfortunately, statistics show that if you are a Black or Hispanic business owner, you may be more likely to be denied a loan compared to your white or Asian counterparts.

This disparity in loan approval rates highlights the ongoing issue of systemic racism and discrimination in the financial industry.

It is important to note that this does not necessarily mean that Black and Hispanic business owners are less qualified or creditworthy than white or Asian business owners. Instead, it may be due to factors such as implicit bias, lack of access to resources, and historical discrimination.

Knowing that you have options is essential if you are a Black or Hispanic business owner who has been denied a loan.

Consider alternative funding sources such as grants, crowdfunding, or community development financial institutions (CDFIs) that specialize in serving underserved communities.

26. 50% of SBA microloans went to Black- and Latino-owned businesses.

(Source: Nerd Wallet)

If you are a small business owner, you may be interested to know that the Small Business Administration (SBA) has been providing loans to Black- and Latino-owned businesses at an increasing rate.

This is a significant increase from previous years and highlights the SBA’s commitment to supporting underserved communities.

Microloans are small loans typically used by small businesses to purchase equipment, inventory, or supplies or to cover other expenses. The SBA provides microloans of up to $50,000 to small businesses through nonprofit organizations called intermediaries.

These intermediaries are responsible for providing technical assistance to the small business owners who receive the loans.

50% of SBA microloans went to Black- and Latino-owned businesses, which is particularly significant because these communities have historically faced barriers to accessing capital.

By providing loans to these businesses, the SBA is helping to level the playing field and promote economic growth in underserved communities.

27. 43% of white business owners who were considered low-risk applicants received total funding compared to Black (27%), Hispanic (24%), and Asian (19%) business owners who were also considered low-risk.

(Source: Bankrate)

This discrepancy is concerning, suggesting that certain groups are systematically disadvantaged when accessing business funding.

It is important to note that this is not necessarily due to intentional discrimination but systemic issues and biases within the lending industry.

To address this issue, lenders must ensure that their lending practices are fair and equitable for all applicants, regardless of race or ethnicity.

This could include implementing blind application processes that do not consider the applicant’s race or ethnicity and providing additional support and resources to minority-owned businesses.

28. 40% of Black small business owners didn’t apply for financing in 2020-2021 because they believed their applications would be denied.

(Source: Bankrate)

The reasons behind this belief are not entirely clear, but it may be due to the historical discrimination faced by Black entrepreneurs in the lending industry.

This is a significant barrier that needs to be addressed to promote inclusivity and diversity in the small business sector.

It is important to note that denying financing to a business solely based on the owner’s race is illegal. The Small Business Administration (SBA) has programs to ensure that minority-owned firms have equal access to financing opportunities.

Knowing that options are available is essential if you are a Black small business owner who has not applied for financing due to this belief. You can seek assistance from organizations helping minority-owned businesses access funding.

Additionally, you can research and compare different lenders to find the best fit for your business needs.

29. Nearly 80% of new small businesses survive for one year, but this percentage drops to just over 69% after two years and 50.2% after five years.

(Source: Zippia)

Starting a small business is challenging, and the statistics show that keeping a new business afloat can be difficult.

It’s important to remember that these statistics are just averages, and your business may have a higher or lower survival rate depending on various factors. For example, enterprises that receive small business loans or other types of financing may have a better chance of survival than those that don’t.

To increase your chances of success, you must have a solid business plan, manage your finances carefully, and stay on top of market trends and changes in your industry.

Doing so can help ensure that your small business survives and thrives.

30. Only 33% of small businesses survive after ten years.

(Source: Fundera)

This statistic highlights the importance of proper planning, financial management, and a solid business strategy.

You should clearly understand your market, competition, and customer needs, as well as a well-defined business plan and a realistic budget.

One way to increase your chances of survival is to consider applying for a small business loan. Small business loans can provide the necessary funds to help your business grow and thrive.

However, it’s essential to research and find a loan that fits your specific needs and financial situation.

31. Large banks approve 13.8% of all small company loans.

(Source: FinImpact)

If you seek a loan from a large bank, your chances of getting approved are relatively low.

It’s important to note that while large banks may have lower approval rates, they still play a significant role in small business lending. In 2020 alone, large banks approved over $8 billion in small business loans.

However, if you are seeking a loan and have been turned down by a large bank, it may be worth considering alternative lenders or small banks as potential options.

32. Smaller banks provide a 19% approval rating, and non-bank loans have an approval rating of nearly 25%.

(Source: Fundera)

It’s important to note that approval rates can also vary depending on the type of loan. For instance, auto and equipment loans have an 80% approval rate, while business lines of credit have a 73% approval rate.

Home equity lines of credit have a 70% approval rate, and mortgages have a 69% approval rate. Traditional business loans have a 67% approval rate.

When applying for a small business loan, it’s essential to research different lenders and their approval rates. Consider your business’s needs and financial situation before choosing a lender.

Remember that a higher approval rate doesn’t necessarily mean a better loan option. Read the terms and conditions carefully and compare different loan options before deciding.

33. 32% of all small businesses go to non-bank lenders for their loans.

(Source: Capital Bank)

Non-bank lenders offer various loan options, including term loans, lines of credit, and invoice financing. They often have less stringent credit requirements and are more willing to work with small businesses that may not meet traditional banks’ criteria.

One of the main advantages of non-bank lenders is the speed at which they can provide funding.

The application process is often quicker and more streamlined, and funds can be disbursed in days rather than weeks or months.

However, it’s important to note that non-bank lenders may charge higher interest rates and fees than traditional banks. Therefore, small business owners should carefully consider their options and thoroughly research potential lenders before deciding.

34. The average small business loan from alternative lenders is between $50,000 – $80,000.

(Source: Value Penguin)

This amount is relatively small compared to traditional banks, but it can be enough to cover the expenses that small businesses need to grow.

Some of the most well-known alternative lenders include Fundbox, BlueVine, OnDeck, Credibly, Balboa Capital, QuarterSpot, and Funding Circle.

These lenders are typically private companies that operate online. They offer various loan options to meet the needs of small businesses.

Alternative lenders are an excellent option for small businesses needing quick funds access. They often have less stringent requirements than traditional banks and can provide funding in as little as 24 hours.

However, alternative lenders may charge higher interest rates and fees than traditional banks, so comparing rates and terms is essential before accepting a loan offer.

35. The alternative lending market was valued at approximately $334.28 billion in 2021 and is expected to grow at a compound annual growth rate of 4.70% between 2021 and 2025.

(Source: Credit Suite)

If you are a small business owner looking for funding, you may have heard of alternative lending. Alternative lending refers to non-traditional sources of financing, such as online lenders, crowdfunding, and peer-to-peer lending.

The growth of the alternative lending market can be attributed to several factors. One of the main drivers is the increasing demand for small business loans.

Traditional lenders, such as banks, have strict lending criteria and may not be willing to take on the risk of lending to small businesses.

Alternatively, alternative lenders often have more flexible lending criteria and may be willing to lend to businesses that traditional lenders have turned down.

Another factor contributing to the growth of the alternative lending market is the increasing use of technology.

Online lenders, for example, can use algorithms to quickly assess a borrower’s creditworthiness and make lending decisions in minutes. This makes the lending process faster and more convenient for small business owners.

However, it is essential to note that alternative lending has risks. Interest rates on alternative loans may be higher than those offered by traditional lenders, and some may charge hidden fees.

36. The alternative lending market in the United States is predicted to expand at an annual growth rate of 2.4% from 2021 to 2025.

(Source: Lead Squared)

This means that more and more small businesses are turning to alternative lending options to secure the funding they need.

Marketplace lending is the largest segment of the alternative lending industry, with a projected transaction value of US$8,684.9 million in 2022. Peer-to-peer (P2P) loans are also expected to be incredibly popular in the coming years.

If you’re considering alternative lending for your small business, it’s essential to research and compare different lenders and their terms.

Alternative lending can provide quick access to funding but may come with higher interest rates and fees. Be sure to weigh the pros and cons before making a decision.

37. About 20% of all loans to small businesses get denied due to credit problems.

(Source: Capital Bank)

A credit score numerically represents a borrower’s creditworthiness and financial history. Lenders use this score to determine the risk of lending money to a borrower.

Your chances of getting loan approval are significantly reduced if you have a poor credit rating.

Therefore, it’s essential to maintain a good credit score by paying bills on time, keeping credit card balances low, and avoiding opening too many new credit accounts.

One way to improve your credit score is to check your credit report regularly for errors or inaccuracies. If you find any errors, you can dispute them with the credit bureau to have them corrected.

Additionally, you can work with a credit counselor to develop a plan to improve your credit score.

If you have a poor credit rating and struggle to get approved for a loan, you may want to consider alternative financing options. For example, you can look into crowdfunding, grants, or microloans.

While these options may have higher interest rates, they may be more accessible to borrowers with poor credit.

38. The market for revenue-based financing is on a sharp upward trajectory and is set to expand to $25.94 billion by 2027, demonstrating a steady growth rate of 66.4%.

(Source: Globe News Wire)

If you are a small business owner looking for alternative financing options, revenue-based financing might be a good fit for you.

This type of financing allows you to borrow money against your future revenue, which means you don’t have to give up equity in your company or take on a lot of debt.

According to recent market research, the revenue-based financing market is increasing. This growth is driven by rising demand for equity-based financing alternatives and the provision of flexible repayment structures.

Revenue-based financing benefits startups and small businesses with limited access to traditional bank loans or venture capital. It allows them to get the capital they need to grow their business without giving up control or ownership.

One of the benefits of revenue-based financing is that it aligns the interests of the lender and the borrower. Since the lender invests in the business’s future revenue, they are vested in helping the enterprise succeed.

This can lead to a more collaborative and supportive relationship between the lender and the borrower.

39. The renovation and construction sector receives about 15% of the loans granted to SMEs.

(Source: Tech Report)

Regarding small business loans, the renovation and construction sector is one of the primary beneficiaries.

This is not surprising considering the nature of the renovation and construction business. These businesses require significant capital investments to purchase equipment, hire workers, and cover other expenses.

Small business loans provide a lifeline for these businesses to meet their financial needs.

In addition, small business loans for renovation and construction projects tend to have lower interest rates than other loans.

This is because the loans are secured by the renovated or constructed property, reducing lenders’ risk.

40. Full-service restaurants receive the highest volume of SBA loans for small businesses.

(Source: Business Journals)

In 2021 alone, 28,680 full-service restaurants were given SBA loans totaling $17.1 billion.

It’s important to note that limited-service restaurant enterprises are in second place, with 19,141 small business loans distributed and the highest lending approval rates.

However, the total amount of these loans was $10.6 billion less than that of full-service restaurants.

Why are full-service restaurants receiving the highest volume of SBA loans? One reason could be that they require significant capital to start and maintain. The costs of running a restaurant can quickly add up from equipment and inventory to rent and utilities.

Additionally, the restaurant industry is highly competitive, and having access to capital can help small business owners stay afloat and remain competitive.

41. Not all business sectors are eligible for SBA loans.

(Source: First National Bank)

Businesses involved in lending, investment, and speculation—such as banks, finance companies, and investment firms—are not eligible for SBA loans.

Additionally, businesses involved in gambling, adult entertainment, and illegal activities are not eligible for SBA loans.

It’s important to note that even if your business is not eligible for an SBA loan, other funding options are still available. You can explore alternative lending options like online lenders, credit unions, and community development financial institutions (CDFIs).

42. 51% of rural small businesses are much more likely to receive a loan for all requested Finance.

(Source: Fed Small Business)

This is an exciting finding, given that only 17% of small businesses operate in rural areas. This suggests that lenders may see rural small businesses as less risky investments and are more willing to provide them with the requested financing.

It’s important to note that while rural small businesses may have a higher chance of receiving all of the requested finances, this does not necessarily mean they have an easier time obtaining loans overall.

43. Approximately 38% of urban businesses tend to receive the total amount of loans requested.

(Source: Springer)

This means that most small businesses in urban areas may not receive the funding they need to grow.

Small businesses may not receive the total amount of funding requested for several reasons. One common reason is a lack of collateral or credit history, which makes it difficult for lenders to assess the risk of lending money.

Another reason is a lack of profitability or cash flow, making it difficult for lenders to see the potential for a return on their investment.

If you’re a small business owner in an urban area looking for funding, you should be realistic about your chances of receiving the total amount requested.

You may need to explore alternative funding sources or adjust your business plan to make it more attractive to lenders.

44. About 62% of loan applications from rural small businesses go to small banks.

One reason for this trend is that small banks tend to understand better the local economy and the needs of small businesses in the area. They are also more willing to take risks on small businesses that may not have a long credit history or a lot of collateral.

However, small banks may not always offer the best interest rates or loan terms. Before deciding, it is crucial to shop around and compare offers from different lenders.

45. In urban areas, 53% of small businesses require loans from larger banks compared to 43% from smaller ones.

If you are a small business owner operating in an urban area, you may be more likely to seek loans from larger banks. This trend may be because larger banks have more resources and may be able to offer better loan terms and interest rates.

However, it is essential to note that seeking loans from larger banks may not always be the best option for your small business.

While larger banks may have more resources, they may also have stricter lending requirements and may be less willing to take on riskier loans.

It may also be worth considering smaller banks or alternative lenders, as they may be more willing to work with small businesses and offer flexible loan terms.

46. Black-owned Businesses can Access Under 2% of Small Business Loans, Though 13% of the Population are Black Americans.

One reason for this disparity is that Black entrepreneurs often face systemic barriers when accessing capital.

These barriers can include discrimination from lenders, lack of access to networks and resources, and historical disadvantages that limit their ability to build wealth and financial stability.

Another factor is that Black-owned businesses often operate in industries less likely to receive funding, such as retail, food, and personal services.

These industries have lower profit margins and higher failure rates, making them riskier investments for lenders.

Despite these challenges, resources are available to help Black entrepreneurs access capital and grow their businesses.

The Small Business Administration (SBA) offers loan programs designed explicitly for minority-owned firms, including the 8(a) Business Development Program and the Minority Business Development Agency (MBDA).

In addition, a growing number of community development financial institutions (CDFIs) provide loans and other financial services to underserved communities, including Black-owned businesses.

These organizations often have a deep understanding of the unique challenges facing Black entrepreneurs and can provide personalized support and guidance throughout the lending process.

47. Black-owned companies are twice as likely to be denied a loan as white-owned companies.

(Source: Federal Reserve)

A study conducted by the Federal Reserve found that 47% of Black small business owners who applied for a loan were denied, compared to 34% of white small business owners.

This disparity is even more pronounced when it comes to larger loans. Black business owners were 3.5 times more likely to be denied a loan of $100,000 or more compared to white business owners.

There are several reasons why Black-owned businesses are more likely to be denied a loan. One of the main reasons is the wealth gap between Black and white Americans.

Black Americans have historically faced discrimination in housing, education, and employment, which has resulted in a significant wealth gap. This wealth gap can make it difficult for Black business owners to meet the financial requirements to secure a loan.

Another reason is the lack of access to banking services in Black communities. Many Black-owned businesses are located in neighborhoods considered high-risk by banks, making it harder for them to access banking services.

This lack of access can result in a lack of credit history, making it harder for Black business owners to secure a loan.

48. Less than 47% of the black-owned companies’ financing applications are approved.

(Source: The Guardian)

The reasons behind this disparity are complex and multifaceted. One contributing factor is Black entrepreneurs’ lack of financial resources and networks.

Many Black-owned businesses operate in low-income areas with limited access to capital, making it challenging to secure financing.

Another factor is the higher risk perception associated with Black-owned businesses. Lenders may perceive these businesses as riskier investments due to a lack of collateral or a shorter track record.

This perception can lead to higher interest rates and stricter lending requirements, making it even more challenging for Black entrepreneurs to access the financing they need.

49. Women-owned small businesses receive only 16% of small business loans, even though about 30% of small firms are owned by women.

(Source: Tompkins Community Bank)

There are several reasons why women-owned small businesses receive fewer loans than their male counterparts. One reason is that women tend to have lower credit scores than men, making it harder to qualify for loans.

Additionally, women-owned businesses tend to be smaller than male-owned businesses, making them appear riskier to lenders.

Fortunately, there are some steps women-owned small businesses can take to increase their chances of securing funding. One option is to look for lenders who specialize in working with women-owned businesses.

These lenders may be more willing to work with female entrepreneurs and more likely to offer favorable loan terms.

Another option is to work on improving your credit score. You can do this by paying bills on time, keeping credit card balances low, and checking your credit report regularly for errors.

50. About 40% of small and medium enterprises in most countries source financial loans from small banks.

Small banks are typically defined as banks with less than $10 billion in assets. These banks are often more willing to work with SMEs than larger banks because they better understand the local market and the needs of small businesses.

In addition, small banks are often more flexible regarding lending criteria, which can be a significant advantage for SMEs that may not meet the strict requirements of larger banks.

Another advantage of working with small banks is that they often offer more personalized services than larger banks. This can be especially important for SMEs needing more guidance and support when financing their businesses.

Small banks can give SMEs the advice and support they need to make informed decisions about their financing options.

Despite the advantages of working with small banks, SMEs should still do their due diligence when choosing a lender.

51. The highest lending approval rates for small businesses are found among institutional lenders, such as insurance companies and pension funds, at 66%.

(Source: Alt Line)

If you can secure a loan from an institutional lender, you are more likely to be approved than if you apply to other types of lenders.

However, it’s worth noting that other small business lending entities, such as alternative lenders, are not far behind, with a 56.8% approval rate.

It’s also important to consider that the lending market can be challenging. Even if you are applying to institutional lenders, you must have a strong business plan and financials to be approved.

This might include a solid credit score, a detailed business plan, and a clear plan for using the loan funds.

52. About 20% of small businesses that applied for business loans received all the funding they requested.

(Source: Shopify)

This means most small businesses are not getting the funding they need to grow and succeed.

There are many reasons why small businesses may not receive all the funding they requested. One reason could be that they do not have a strong enough credit history or business plan.

Another reason could be that they are applying for a loan from a lender who is not a good fit for their business. Small businesses need to research and find a lender who is the right fit for their needs.

This may mean looking beyond traditional banks and exploring alternative lending options, such as online lenders or community development financial institutions (CDFIs).

53. 9% of SMEs receive no capital funding after applying for a loan.

(Source: America’s SBDC)

This can significantly blow SMEs, as they often rely on loans to fund their operations and growth. Without access to capital, SMEs may struggle to invest in new equipment, hire new employees, or expand into new markets.

There are several reasons why SMEs may be rejected for funding. One common reason is a lack of collateral.

Many lenders require collateral to secure a loan, and SMEs may not have the assets necessary to meet these requirements.

Another reason SMEs may be rejected for funding is a poor credit history. Lenders often use credit scores to assess the risk of lending to a business, and SMEs with a poor credit history may be seen as high-risk borrowers.

SMEs can improve their credit scores and build up collateral to increase their chances of receiving funding. They can also explore alternative funding options like crowdfunding or peer-to-peer lending.

54. Only part of the funding they applied for is granted to 14% of small businesses.

When applying for a small business loan, it’s essential to know that not all funding requests are fully granted.

If you’re a small business owner, you should be prepared to adjust your plans accordingly and have a backup plan in case you don’t receive the total amount you hoped for.

Small businesses may not receive the total funding they applied for for several reasons. One common sense reason is that the lender may not be willing to take on the entire risk associated with the loan.

In this case, the lender may be willing to offer a smaller loan amount that they feel more comfortable with.

Another reason small businesses may not receive the total amount of funding they applied for is that they may not meet all of the lender’s requirements.

For example, suppose the lender requires a specific credit score or collateral, and the small business does not meet these requirements. In that case, the lender may offer a smaller loan amount or decline the loan altogether.

55. Fintech lenders use other ways to assess the creditworthiness of borrowers, like machine learning.

Regarding small business loans, traditional lenders like banks and credit unions typically evaluate borrowers’ creditworthiness based on credit scores, financial statements, and other conventional data.

However, fintech lenders are using other ways to assess the creditworthiness of borrowers, like machine learning.

Machine learning is artificial intelligence that allows computer systems to learn and improve from experience without being explicitly programmed automatically.

To determine creditworthiness, Fintech lenders use machine learning algorithms to analyze alternative data sources, such as social media activity, online shopping behavior, and even how applicants fill out their loan applications.

By leveraging alternative credit-scoring models and data sources, fintech lenders can assess the creditworthiness of underserved populations, including thin-file borrowers and small businesses with limited financial histories.

This has led to increased access to credit for small businesses that traditional lenders may have turned down.

Online lenders, like CreditNinja, and fintech firms, revolutionized the small business loan market. They tout fast and easy application processes, with most applications taking days, not weeks, to be funded. Although they tend to be pricier, these loans are an important alternative for companies needing fast capital.

56. Artificial intelligence and data analysis are sometimes used to assess creditworthiness and speed up the application process.

One of the most important factors lenders consider when evaluating a minor business loan applicant is their creditworthiness. Traditionally, creditworthiness has been assessed based on credit score, payment history, and debt-to-income ratio.

However, with the advent of artificial intelligence and data analysis, lenders now have access to a broader range of data points that can be used to assess creditworthiness.

Artificial intelligence and data analysis can analyze various data points, including social media activity, online purchasing behavior, and facial recognition data.

By examining this data, lenders can gain a more complete picture of your creditworthiness, which can help speed up the application process and increase the chances of approval.

57. Although black people comprise more than 13 percent of the U.S. population, they received only 8 percent of all SBA 7(a) loan proceeds in 2023.

(Source: Bankrate)

This disparity is concerning, especially considering that small businesses are the backbone of the U.S. economy. Small businesses account for more than 99 percent of all businesses in the country and employ nearly half of all American workers.

While the SBA has taken steps to address this issue, such as launching programs specifically aimed at helping minority-owned businesses, more needs to be done.

As a Black small business owner, knowing your options and proactively seeking funding opportunities is essential.

58. Only 8.5 percent of 7(a) funding in the 2023 fiscal year went towards Hispanic-owned businesses.

(Source: Bankrate)

In the 2023 fiscal year, the SBA approved $27,515,666,000 in SBA 7(a) business funding. Of that amount, Hispanic business owners received only 8.5 percent. Meanwhile, white business owners received 42.3 percent, and Asian business owners received 19.0 percent.

It’s important to note that these statistics do not necessarily mean that Hispanic-owned businesses are less likely to get approved for SBA loans. Many factors go into loan approval, including credit score, business plan, and industry.

However, it suggests that Hispanic-owned businesses may not receive the same support from the SBA as other groups.

If you’re a Hispanic business owner looking for funding, options are still available. The SBA offers several loan programs, including the 7(a) loan, Microloan, and Community Advantage programs.

Additionally, many private lenders offer small business loans.

59. Asian-owned businesses received 11.7 percent of 7(a) loan approvals in 2023 and nearly 19 percent of 7(a) loan amounts.

(Source: Bankrate)

It is important to note that while Asians only make up 6.3 percent of the U.S. population, they account for 11.7 percent of 7(a) loan approvals in 2023.

This suggests that Asian-owned businesses are more likely to receive SBA loans than businesses owned by other ethnic groups.

If you are an Asian business owner, you may wonder why Asian-owned businesses receive more SBA loans. One possible explanation is that Asian-owned enterprises have an average higher credit score than other ethnic groups.

This could make them more attractive to lenders and increase their chances of receiving a loan.

Another possible explanation is that Asian-owned businesses tend to operate in industries more likely to receive SBA loans, such as healthcare, professional services, and retail trade. These industries accounted for a significant portion of SBA loans in 2023.

60. Native Americans and Alaska Natives receive the smallest amount of SBA approvals and funding — less than one percent.

(Source: Funding Circle)

This disparity can be attributed to various factors, including historical and ongoing discrimination and lack of access to resources. However, there are still options for small business owners in Native American and Alaska Native to obtain business funding.

One option is to seek out small business loans and grants designed for Native American and Alaska Native-owned businesses.

The U.S. Small Business Administration’s (SBA) Office of Native American Affairs (ONAA) facilitates full access to business growth and expansion tools for small businesses owned by Native Americans.

ONAA engages in tribal consultations, produces promotional materials, and participates in national economic development initiatives to support Native American and Alaska Native small business owners.

Another option is to explore alternative lenders that specialize in providing loans to underserved communities, including Native American and Alaska Native small business owners.

These lenders may have more flexible lending criteria and can provide funding when traditional lenders cannot.

61. Since 2017, SBA 7(a) loans approved for businesses owned at least partially by women have hovered around 30% to 33%.

(Source: AOL)

This means that while progress has been made in recent years, there is still work to be done to close the gender gap in business lending.

The agency’s primary business loan program is the SBA 7(a) loan program. It provides loan guarantees to lenders, allowing them to help small businesses with special requirements.

These loans can be used for work capital, equipment purchases, and real estate acquisition.

While progress has been made in recent years in increasing the number of SBA loans approved for women-owned businesses, there is still a significant gap to close.

If you are a woman-owned business seeking funding, exploring your options and working with lenders committed to supporting diversity and inclusion in business lending is vital.

62. From 2017 to now, women-owned businesses have yet to collect more than 30% of 7(a) loan proceeds in any given year.

(Source: Bankrate)

This statistic shows that there is still a significant gap in lending to women-owned businesses compared to their male counterparts.

To address this gap, the SBA has taken steps to provide more support to women-owned businesses. For instance, in 2022, the SBA delivered over $10 billion in capital to women-owned small businesses through its 7(a) and 504 loan programs.

Additionally, the SBA-backed 504 and 7(a) loans to small businesses are up 70 percent, totaling $5.1 billion in lending to women-owned businesses in FY23.

63. Just 21.2% of approved 7(a) loans in 2023 went to women who own 50% or more of a company, accounting for only 16.2% of total distributed dollars.

(Source: AOL)

If you are a woman looking for a small business loan, you must know these statistics. You may need to work harder to secure funding for your business than your male counterparts.

However, options are available to you, such as grants and alternative lending sources.

Key Business Loan Programs

As a small business owner, you have several loan options. In this section, I will discuss the critical small business loan programs that are available.

SBA 7(a) Loan Program

The SBA 7(a) loan program is one of the most popular loan programs available to small business owners. The program provides loans up to $5 million for various purposes, including working capital, equipment purchases, and real estate.

The interest rates on these loans are typically lower than those offered by traditional lenders, and the repayment terms are longer.

To qualify for an SBA 7(a) loan, you must meet specific eligibility requirements, including being a small business as defined by the SBA, having a solid credit history, and demonstrating the ability to repay the loan.

SBA 504 Loan Program

The SBA 504 loan program is designed to help small businesses purchase real estate and equipment. The program provides long-term, fixed-rate financing with low down payments.

The loans typically finance up to 50% of the total project cost, with a private lender financing the remaining 50%.

To qualify for an SBA 504 loan, you must meet specific eligibility requirements, including being a small business as defined by the SBA, having a solid credit history, and demonstrating the ability to repay the loan.

Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) was created in response to the COVID-19 pandemic to provide small businesses with forgivable loans to cover payroll and other expenses.

The program has since been expanded to provide additional funding to small businesses.

To qualify for a PPP loan, you must meet specific eligibility requirements, including being a small business defined by the SBA, having been in operation as of February 15, 2020, and demonstrating a need for the loan based on economic uncertainty caused by the pandemic.

Alternative Financing Options

If you’re a small business owner, you may wonder about alternative financing options beyond traditional bank loans. Two popular choices are crowdfunding and merchant cash advances.

Crowdfunding and Its Impact

Crowdfunding is a way to raise funds for your business from many people, typically through an online platform. It can be an excellent option for companies with a unique product or service and a robust online presence.

Crowdfunding campaigns can generate buzz and interest in your business while raising funds.

However, it’s important to note that crowdfunding is not a guaranteed funding source. Your campaign may not reach its funding goal, and even if it does, you may have to give up a portion of your business or profits to investors.

Merchant Cash Advances

Merchant cash advances are a type of financing where a lender provides you with a lump sum of cash in exchange for a portion of your future credit card sales. This can be a good option for businesses with high credit card sales but may not qualify for traditional bank loans.

However, knowing the high interest rates and fees associated with merchant cash advances is essential. You could end up paying back significantly more than you borrowed.

Final Thoughts on Lending & Loan Statistics

Now that you better understand small business loan statistics, you can make more informed decisions about your business’s financing needs. Remember that loans can be a great way to obtain capital, but they are not your only option.

Before committing to a loan, consider exploring alternative financing options, such as crowdfunding, grants, or personal savings. Additionally, compare rates and terms from multiple lenders to ensure you get the best deal possible.

Remember that obtaining a loan is just the first step. You must also have a solid plan for using the funds to grow and sustain your business.

This includes creating a detailed budget, tracking expenses, and regularly reviewing your financials to ensure you are on track to meet your goals.

Frequently Asked Questions on Small Business Loans

Other Research & Statistics Guides