Small Business Loan Statistics (2024)

Last Updated October 4, 2024

If you’re a small business owner considering applying for a loan, it can be helpful to first have an idea of some small business loan statistics. By understanding what the national market trends and averages are, you can have a benchmark of sorts to help gauge what might be attainable and realistic for your business.

Continue reading to discover 15 small business loan statistics that will help you determine what you’re in store for when you click submit on your loan application.

15 Small Business Loan Statistics

Below are some of the most relevant average small business loan statistics that reveal the current lending landscape.

1. Average Small Business Debt is $195,000

Rising interest rates and inflation have made life harder than usual for small business owners, who, on average, have $195,000 of debt racked up, according to Yahoo.

New business owners need to understand that it’s completely normal for individual savings to not cover all of the costs of running a business. Bank loans are the 2nd-most common source of financing for small businesses. What’s more important is having an action plan to ensure you’re able to repay this debt.

2. Small Business Loan Approval Times Can Be Very Quick

According to the FDIC’s 2024 Small Business Lending Survey Report:

• 39% of banks can approve a small and simple loan within one business day or less.
• 76% of banks can approve a small loan within five business days.
• 90% of large banks can approve a small loan within ten business days.

3. Term Loans Most Common Small Business Lending Product

Per the same 2024 FDIC report, term loans and lines of credit are the two most common sources of startup and small business capital.

Here is the percentage of banks that offer specific types of lending products:

• Term loans: 92% of small banks, 86% of large banks
• Lines of credit: 88% of small banks, 86% of large banks
• Letters of credit: 62% of small banks, 78% of large banks
• Government-guaranteed lending: 42% of small banks, 74% of large banks
• Credit cards: 12% of small banks, 38% of large banks

4. The National Money Supply Is Failing to Rise for the First Time Since 1949

According to public data released by the U.S. Federal Reserve, the money supply is a touch over $21 trillion, down from its $22 trillion peak in April 2022. That figure has generally been falling or stalled since that record-breaking period in 2022, the first time the supply hasn’t consistently trended upward since 1949.

Policy changes and rising inflation are the main factors for the Federal Reserve shrinking its balance sheet. However, research shows that these figures are likely unrelated to the possibility of a serious economic recession.

5. Small Business Owners Are Having Harder Time Qualifying for Financing

There is evidence that this economic uncertainty, highlighted by the above statistic, has impacted small business owners when it comes to qualifying for loans. Per a Goldman Sachs survey, 77% of small business owners are worried about their limited access to credit. This is a stark contrast from the same survey published the previous year, where only 23% of respondents said they are worried about access to funds.

6. Small Banks Are Responsible for Most Commercial and Industrial Loans to Small Businesses

Small businesses and small banks often go hand-in-hand. Per Goldman Sachs, 70% of small business loans are provided by banks with less than $250 billion in assets, highlighting the impact and importance small banks have on our economy.

This type of lending is so common because new businesses typically can’t qualify for more traditional loans with larger banks due to a lack of credit and hard assets. The flexibility offered by smaller financial institutions is hugely beneficial for owners of startups and small businesses who need an alternative financing solution.

7. Startups More Likely to Receive Funding from Small Banks Instead of Large Banks

If you run a startup, you’re probably better off starting your search for startup funding with smaller institutions, as 66% of small banks typically lend to startups vs. 54% of large banks, per FDIC. This is likely due to large banks more often relying on information from credit bureaus when evaluating loan applications, which can disqualify owners of startups who have a lack of credit history.

8. Alternative Financing Has Become Increasingly Popular Each Year Since 2019

The number of small businesses that apply for a business loan dropped from 43% in 2019 to 37% in 2020 to 34% in 2021, according to the most recent data provided by Forbes.

Exact reasons for the drop are unclear, though one explanation could be related to the fact that banks are becoming more stringent on extending funds to small businesses. In 2019, 51% of loan requests were granted and approved in-full. In 2021, that number shrank to just 31%, meaning small business owners might be taking notice and forgoing the applications altogether to save time.

What this does mean is that forms of alternative financing, such as crowdfunding, peer-to-peer lending, and invoice factoring, are becoming more popular, which makes sense given how much more attainable they generally are. Take factoring, for example. For qualification, there’s no minimum credit score required, no collateral required, and very little documentation required. As long as the applying business’s debtors can be relied upon to pay their invoices, qualification is likely.

9. Business Expansion No. 1 Reason Why Small Businesses Apply for a Loan

Unsurprisingly, general business expansion is the main reason small business owners need outside funding help.

While it’s critical to have personal funds in your bank account to support the launch of your business venture, even the most successful entrepreneurs might not be prepared to handle instances where growth is higher than expected or happens quicker than expected. And you don’t want to tackle business expansion with insufficient working capital. It can stall operations quickly.

Perhaps more surprising is the fact that marketing and advertising costs were listed as the No. 3 reason for small business loan applications. With so many different ways to market and advertise your business in today’s day and age, mainly in relation to the importance of online visibility, entrepreneurs are looking for any way to get a leg up over their competitors.

10. Small Business Owners Take 5-6 Months to Spend Loan Funds (On Average)

Given the fact borrowers are paying interest on these loans, it’s helpful to spend credit as efficiently and quickly as possible.

Among 500 people surveyed by Forbes, the majority said that it took 5-6 months to spend the entirety of their small business loan. However, results varied quite significantly, showing that it’s common for the credit to last anywhere from 1-10 months. By month 11, only 15% of respondents were still spending funds.

11. Startup Borrowers Main Beneficiary of Lenders Who Don’t Check Credit Scores

Many startup owners might worry about how their credit score could impact borrowing. Thankfully, some banks do not always place high importance on credit history. This is especially common when it comes to alternative financing solutions, of which many options at borrowers’ disposal don’t require strong creditworthiness.

According to the FDIC Small Business Lending Survey Report (2024), 70% of banks that determine small business loan approval based on factors outside of credit scores lend to startups. Similarly, 79% of banks that do not often require personal credit scores as part of a loan application will lend to startups.

Even among banks that do place high importance on credit scores, 55% of them will still offer lending to startups.

12. Small Business Owners Prioritize Exceptional Customer Service

Per the same FDIC report, the most important qualities small business borrowers look for in a lending institution are:

• Customer service (97% of respondents marked as “high importance”)
• Speed of service (93%)
• Lending flexibility (82%)
• Interest rates/pricing (82%)
• Convenience (79%)
• Sourcing and reputation (61%)
• Customer-facing technology (49%)
• Risk management and cost control (35%)

13. Small Banks More Likely to Offer Better Customer, Faster Funding, Flexibility Than Large Banks

Small banks report a significantly higher competitive advantage than large banks when it comes to customer service, speed of funding, and lending flexibility, according to the FDIC lending survey report. This is particularly important as, per the survey, these are the three most important qualities small business borrowers look for in a lending institution.

14. Women Are at a Disadvantage as Male-Owned Businesses Have a Higher Chance of Approval

Though times have changed for the better over recent decades when it comes to equality in the workplace, there is still room for growth. This is evidenced by the fact that male-owned small businesses in 2022 received 71.6% of loan approval amounts, leaving just 28.4% for women-owned small businesses—despite 39.1% of small businesses nationwide being women-owned and operated.

For the women out there running your own business, you can make the best out of this unfortunate statistic by applying for a small business grant only available for women entrepreneurs in an effort to help level the playing field.

15. Recent Data Shows Georgia Has the Highest 5-Year Average Loan Approval Amount

If you’re wondering what the best state is to start a small business, one factor that can help you decide is looking into where banks are most generous when it comes to lending funds.

According to recent data, the highest average loan approval amounts from the years 2018-2022 were in Georgia ($840,145), followed by Texas ($738,427), California ($702,262), Louisiana ($701,856), and Alaska ($672,935).

Obviously, this data doesn’t tell the whole story, as average loan approval amounts drastically differ based on other factors, such as the industry of the applying business. For example, the average small real estate company receives more than double than transportation and warehouse companies receive. However, it’s still useful data to measure how one state stacks up from the next.

Need Small Business Funding? Consider Invoice Factoring with altLINE

Traditional bank loans aren’t easily attainable for small businesses, evidenced by data such as fewer than 35% of applications having their loan requests approved in full. In many cases, a lack of creditworthiness prevents small businesses from qualifying.

That’s why invoice factoring, an alternative financing solution, is so popular for new and small businesses in the growth phase.

Factoring occurs when businesses sell their outstanding accounts receivable to a third-party factoring company in exchange for an immediate cash advance (typically within 24 hours). The factoring company purchases the invoices at a discounted rate, advancing up to 90% of the value of each invoice.

The factor then assumes collection responsibilities. Once the debtor submits payment, any remaining funds are passed onto the business, minus a small factoring fee, and the process is complete. The best part? You don’t accrue debt at any point throughout the process since the company is purchasing your receivables.

If you have any questions about factoring or think your business could be a good fit, feel free to reach out to one of our representatives at (205) 607-0811 or fill out our free factoring quote form.