Business loans are important in helping small businesses grow by providing the money needed to cover start-up costs, invest in inventory, or upgrade equipment. For many small business owners, these loans are more than just a means to an end; they are a way of life that enables them to take advantage of opportunities to grow and face challenges that come their way. Therefore, it is important to understand the current lending environment that small businesses face.
Important statistics.
- 68% of small business owners say that getting funding is the most important factor in the growth of their business.
- 67% of small business owners do not choose which type of lender they get a loan from.
- 85% of small business owners say the speed of loan approval is important when choosing a lender.
- 77% of small business owners surveyed indicated that they prefer to apply for a loan online or through a mobile app.
- 50% of small business owners say they don’t know if the bank they use to check has the right loan options.
- Only 24% of small business people apply to a bank they already work with.
- The average small business loan is $38,000.
- 59% of SBA loans are approved.
High level overview.
Lendio recently conducted a survey of 1000+ small business owners to better understand how financing affects the success of their business, their experience in today’s lending environment, and how they view the future of small business lending. Of those small business owners, 68% said that getting funding is the most important factor in the growth of their business. Additionally, 46% of those 1000+ small business owners said they would see anywhere from 30-100% revenue growth if they were able to finance their business needs.
Lendio found that 78% of the small businesses it interviewed have a positive view of their ability to raise money in the coming year. Opinions vary on how well a small business can qualify for a loan. Only 12% of highly qualified borrowers say most small businesses don’t have access to the money they need while 21% of less qualified borrowers say the same.
Lendio found that while small business owners generally have a positive view of their ability to get financing, they have a negative view of the loan application process. When asked what type of lender they would choose, 67% of small business owners said they had no choice.
The takeaway:
85%
of small business owners say the speed of loan approval is important when choosing a lender.
While large businesses are willing to go through lengthy loan approval and funding processes, small business owners behave like consumers—they prefer a quick and easy loan process.
- 85% of small business owners say the speed of loan approval is important when choosing a lender.
- 77% of small business owners surveyed indicated that they prefer to apply for a loan online or through a mobile app.
Lendio also found a general lack of knowledge about the small business loan process.
- 50% of small business owners say they don’t know if the bank they use to check has the right loan options.
- Only 24% of small business people apply to a bank they already work with.
- Lendio found that 22% of small business owners either don’t know or don’t have a choice in their type of business financing.
These findings point to the need for more education about the nature of lending to small business owners.
Average business loan amount.
Understanding the average amount of small business loans is important for entrepreneurs who want to plan their financial strategies effectively. Businesses should be aware not only of the rates they may qualify for but also how these rates align with their growth aspirations and operational needs.
- The average amount a small business earns through Lendio’s marketplace is $38,000.
- The average SBA loan in 2023 was $479,685.
- On average, small businesses are granted 50% of the loan they originally requested.
SBA loan approval ratings.
The Small Business Administration (SBA) plays an important role in supporting small businesses by providing access to loans on favorable terms. By 2023, approximately 59% of SBA loans were approved (34% received full approval, 25% received partial approval), indicating that more than half of small business owners successfully navigated the application process. This is a great incentive for entrepreneurs who may face challenges in obtaining traditional financing, as SBA loans often come with low interest rates and long repayment terms.
Reasons for a business loan.
Lendio found that the majority of small businesses pursue loans for a variety of important reasons, primarily to obtain working capital (33%) to support day-to-day operations and manage cash flow. Additionally, small businesses often seek financing for important investments such as equipment purchases (19%), expansion efforts (15%), business start-ups (14%), payroll (6%), real estate (4%), or other purposes. (9%). Each of these reasons highlights the important role that loans play in driving growth and stability in a competitive business environment.
Gender details
Men and women generally had similar responses to Lendio’s survey questions, but a few differences stood out.
Only 46% of women are positive or very positive that they will be able to get the money they need compared to 55.8% of men who say the same. 13% of women also rated their ability to get the money they need as “very poor” compared to 9% of men.
Another important insight points to the need for education related to business lending, especially for women. 53.3% of women and 41.7% of men are unsure about their main bank loan options. More female business owners said they would like to be educated on the business loan application process across the board without interest rates (this was equal). This includes types of lenders, loan agreements, and types of loans.
Women-owned businesses received just 32.6% of approvals and 28.4% of the dollars provided through SBA 7(a) and 504 loans in fiscal year 2024. Across the lending world as a whole, women are less likely to receive the full amount requested. By 2023, 45% of women-owned businesses have been approved for the full amount of capital requested compared to 55% of male-owned businesses.
Additionally, 25% of women are denied a business loan compared to 19% of men.
Little ideas
When it comes to accessing business loans and financing, entrepreneurs of color can face significant challenges.
- 84% of businesses started by a person of color rely on personal savings or money from friends or family to fund their businesses.
- 28% of self-employed businesses started by a person of color received a loan compared to 48% of white business start-ups.
- About half of black entrepreneurs who apply for loans are denied.
The conclusion
Understanding how to lend to small businesses is critical to their growth and success. The statistics presented highlight the important role that access to capital plays in empowering entrepreneurs across the United States. While there is optimism among young entrepreneurs about their ability to raise money, challenges persist, especially for women, minorities, and veteran entrepreneurs.
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The information provided on this blog is for educational purposes only, and is not intended to be business, legal, tax, or accounting advice. The views and opinions expressed in this blog are those of the authors and do not reflect the official policy or position of Lendio. Although Lendio strives to keep its content up to date, it is only accurate as of the date posted. Offers or trends may be out of date, or may no longer be relevant.
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