Intro to Small Business Funding
In this article, we will cover information and resources about funding options for small businesses. We provide this information as a resource for small businesses trying to figure out the small business funding puzzle. Business funding can come from a combination of sources such as friends or family, loans, grants, or crowd funding. In this article, we are going to review funding statistics, key terms, loan resources, grant resources, and crowdfunding resources.
Note: Comprehensive Consulting Solutions for Small Businesses is not a loan officer or lender. This blog and other related materials are based on client experiences, personal experience, loan officer interviews, and other sources and are provided for informational purposes. Any references to specific companies, terms, options, and related are not endorsements, recommendations, or guarantees but are provided as resources to help with your exploration of funding options for your small business.
Stats to Know about Small Business Funding
When operating a small business, having access to the statistics of small business lending can be invaluable. Seeing the habits and trends of small business lending can help small business owners understand how lenders and other business owners approach their finances.
Here are some small business lending statistics and trends according to Fundera:
● "43% of small businesses applied for a loan last year.
● 9% of small businesses received no capital after applying for a loan.
● 14% of small businesses only received a portion of their requested funds after applying for a loan.
● The average SBA loan amount is $107,000.
● 32% of small business applicants turned to online lenders last year.
● 70% of small businesses have outstanding debt.
● 29% of small businesses fail because they run out of capital.
● Only 48% of small businesses overall have their financing needs met.
● 56% of small businesses apply for funding to expand their business, pursue a new opportunity, or acquire business assets.
● 36% of small businesses that were denied at least some of the funding they requested were denied because of their credit score.
● 57% of small business loan applicants sought $100,000 or less.
● At 66%, the approval rate is highest for institutional lenders than for any other type of lending entity.
● Biz2Credit’s Small Business Lending Indexes have found that institutional lenders—like pension funds and insurance companies, for instance—consistently have the highest small business lending approval rates. Other small business lending entities aren’t far behind, though:
○ Alternative lenders have a 56.8% approval rate.
○ Small banks have a 50.1% approval rate.
○ Credit unions have a 39.9% approval rate. ○ Big banks have a 27.7% approval rate.
● At 85%, the approval rate for merchant cash advances is the highest of all types of small business funding. Merchant cash advances offer the highest approval rates of all forms of small business debt financing. 85% of small businesses that apply for a merchant cash advance get approved. However, you might be surprised at how the remaining forms of small business loans compare:
○ Auto and equipment loans have an 80% approval rate.
○ Business lines of credit have a 73% approval rate.
○ Home equity lines of credit have a 70% approval rate.
○ Mortgages have a 69% approval rate.
○ Traditional business loans have a 67% approval rate.
○ Personal loans have a 55% approval rate.
○ SBA loans or lines of credit have a 52% approval rate."