Photo Courtesy: KLH49/Getty Images Signature
Small businesses are the backbone of economies, driving innovation, creating jobs, and fostering community development. However, the journey to success often requires financial support. In this blog post, we’ll look into small business loans and alternative options by examining key statistics that shed light on their impact and significance in the entrepreneurial landscape.
The Landscape of Small Business Loans
As of the latest available data, small businesses account for a significant portion of all businesses globally. In our home state, Texas, there are over 3 million small businesses. According to the World Bank, small and medium-sized enterprises (SMEs) represent about 90% of businesses worldwide. These enterprises play a crucial role in job creation, contributing substantially to employment rates.
Demand for Financing
Despite their economic significance, small businesses often face financial challenges, leading to a growing demand for loans. In a survey conducted by the Federal Reserve, around 43% of small businesses sought external financing in 2020. This highlights the ongoing need for capital to fuel operations, expansion, and innovation.
Traditional Bank Loans
Traditional financial institutions remain a common source of small business financing. According to the U.S. Small Business Administration (SBA), in the United States alone, banks approved over $600 billion in small business loans in 2020. These loans are crucial for businesses looking for stability and consistency in funding. According to Nerdwallet, the average small business loan amount is over $660,000, a much higher amount than what most small businesses need to borrow.
Challenges in Loan Approval
While the demand for small business loans is evident, not all applicants find it easy to secure financing. The approval rates for small business loans can vary, with factors like credit history, business performance, and economic conditions playing significant roles. According to the Biz2Credit Small Business Lending Index, approval rates for small business loans from big banks were around 13.5% in 2020, underscoring the challenges many entrepreneurs face in obtaining financing.
Emergence of Online Lending
The digital era has ushered in new possibilities for small business financing. Online lending platforms have gained popularity, offering faster processing times and increased accessibility. According to a report by Statista, the global online alternative finance market reached a transaction value of over $300 billion in 2020. This highlights the growing role of digital platforms in connecting small businesses with the funding they need.
Governments around the world recognize the importance of small businesses and often provide support through loan programs. In the United States, the Small Business Administration (SBA) is a key player, offering various loan programs to assist small businesses, especially during challenging economic times. In 2020, the SBA facilitated over $100 billion in loans, providing a lifeline to businesses impacted by the COVID-19 pandemic.
The statistics surrounding small business loans tell a compelling story of resilience, demand, and the evolving landscape of entrepreneurship. As small businesses continue to navigate economic challenges and pursue growth opportunities, access to financing remains a critical factor. Whether through traditional bank loans, online lending platforms, or government-backed initiatives, the numbers demonstrate the dynamic nature of small business financing and its vital role in fostering economic development and innovation. Understanding these statistics empowers entrepreneurs to make informed decisions as they seek the financial support necessary to turn their business dreams into reality.
If you are currently considering an online alternative financing option, Cactus Cash has provided online funding since 2014 to small business owners in several industries; from auto repair shops to restaurants; and from home health care to beauty shops and everything in between. Our revenue-based online funding offers competitive rates, simple terms, and if approved, access to quick cash. In addition, Cactus Cash requires a personal credit score as low as 550 and will only do a soft pull which will not affect your credit score.