Published December 22, 2021 by WC Team

Small Business Lending Statistics and Trends (2021)

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Overview: Small Business Lending Statistics & Trends

The following article presents an analysis of data gathered by interviewing conventional lenders and rising players in the financial technology field about how they categorize their business clients, the methods they use to analyze the trustworthiness of small companies and the issues they face. 

Even if you aren't seeking a small business loan right now, it's always great to stay updated with the financial market and look at it through a data driven lens. 

We've selected 14 of the most recent and eye-catching small business loan figures for you to get a sense of how the market is performing right now:

14 Small Business Lending Statistics & Trends You Need To Know

29 Percent Of Small Firms Fail Due To A Lack Of Financing

While many small firms seek money from investors, others seek small business loans to cover up for financial shortfalls, which results in their loans going down the drain. 

The second most prevalent reason for small business failure is a lack of finance. This is the reason that 29% of small enterprises fail. 42% of these businesses fail due to a lack of market demand for their products or services, which can also result in a capital shortfall. 

Last Year, 43% Of Small Firms Applied For A Loan

Nearly 50% of small firms sought financial assistance last year. As per the Federal Reserve's Small Company Credit Report, in the same year, 43% of these firms applied to a small business lender.

The Approval Rate For Institutional Lenders Is The Highest Of Any Form Of The Lending Business, At 66%

According to Biz2Credit's Small Company Loan Indexes, institutional lenders, such as pension funds and insurance firms, have the highest small business lending approval rates consistently: which is 66%. 

Other small company financing institutions, on the other hand, aren't far behind:

Other borrowers have a favorable rating of 56.8%. Regional banks are approved at a rate of 50.1%. Credit unions have an approval rate of 39.9%. The approval rate for large banks is 27.7%.

Merchant Cash Advances Have The Greatest Approval Rate Of Any Small Company Borrowing, At 85%

It should come as no surprise that merchant cash advances have the greatest approval rates of any small company debt finance. Small firms who seek a merchant cash advance are accepted in 85% of cases.

Only 48% Of Small Firms Get All Of Their Financial Needs Addressed

Only 48% of small firms have access to all of the capital they require. 

This 48% comprises 20% of small companies which qualified for all of the money they required after applying for a loan from a bank. The remaining 28% of small businesses did not apply for funding because they had enough cash.

After Asking For A Loan, 9% Of Small Firms Received No Funding

Although small firms have a better chance of receiving all of the financing they want. 9% of tall small firms who applied for the loan ended up getting no loan whatsoever. 

After Asking For A Loan, 14% Of Small Firms Received Only A Part Of The Amounts Asked

On the other hand, small enterprises may ask for financing and only be approved for a percentage of the loan amounts sought. 

14% of small firms applied for a small business loan and out of those, 34% obtained a part of their required finance.

So, with a 34% versus a 9% chance of receiving some funding as a consequence of the small business loan application procedure, the chances are in your favor.

The Average Amount Of A Small Company Bank Loan Is $633,000

Banks, both large and small, are hesitant to give out small company loans since they are less profitable. 

Big company loans and small business loans often cost the same amount to handle, while small business loans make the bank less profitable.

The Typical SBA Loan Is For $107,000

SBA loans, on the other hand, are supported by Small Business Management and pose far less risk to banks that engage in the SBA borrowing program. 

As a result, they appear to be more inclined to support small company loans with lower amounts. As indicated by the typical SBA loan amount, the loans were $107,000.

Last Year, 32% Of Small Company Applicants Used Internet Lenders

Last year, 32% of small firms seeking capital used an internet lender. Over the last three years, this small company loan number has increased significantly, rising from 19% to 30%.

And this rise implies that internet lenders are gaining ground on more traditional lenders: 49% of small firms seek loans from major banks, while 44% seek loans from small banks.

70% Of Small Firms Are In Debt

Surprisingly, over three-quarters of all small firms are in debt. According to the Federal Reserve, 70% of small businesses have some type of outstanding debt. Having said that, the majority of small firms with outstanding debt owe less than $100,000. 17% of small firms have debt ranging from $1 to $25,000, and 21% have debt ranging from $25,000 to $100,000.

56% Of Small Firms Seek Finance To Grow Their Operations, Pursue New Opportunities Or Buy Company Assets

In contrast to the perception that small company finance is only available to fail enterprises, the Federal Reserve found that 56% of small businesses seek funding to grow their operations, pursue new opportunities, or buy assets.

36% Of Small Firms Who Were Rejected At Least Some Of The Money They Sought Were Declined Due To Their Credit Score

The most typical reason small companies are refused at least some financing is their credit score. This is the most often mentioned reason, reported by 36% of refused applications. 

When a small company lender declines an applicant's request, numerous variables might come into play. For example, 35% of refused applicants already had too much debt, and 33% had inadequate credit history, both of which have a total credit score.

57% Of Small Company Loan Applicants Requested $100,000 Or Less

Nonetheless, most small firms that apply for financing don't ask for much—57% of small company loan applicants requested $100,000 or less in cash. 

Furthermore, 20% wanted less than $25,000, and only 8% wanted more than a million dollars.

The Bottom Line

Now that you're aware of all of the ins and outs, ups and downs of small business loans’ facts and figures, what are your next actions? 

So, if you're a small company owner thinking about asking for a loan, be sure your selections are based on data. Small companies around the United States are seeking and receiving the money to help themselves grow. And your odds of obtaining at least part of the financing you require to complete that project, buy that new piece of equipment, or hire that game-changing person you’ve been looking for. And as they say, something is better than nothing. 

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