The average small business loan in 2020 was $71,072
The average small business loan in 2020 was ,072

The average small business loan size for small businesses in the United States in 2020 was $71,072. This compares to fixed rate loans, which had an average balance of $66,917 in the same year.

These numbers were discovered by research by AdvisorSmith, provider of resources and research for small businesses.



Average size of small business loans in 2020

The study was designed to find out the average loan size for small businesses in the United States. This was AdvisorSmith reviewing recent data from the Federal Reserve’s Small Business Lending Survey. 105 lenders were interviewed.

The average loan size secured by the Small Business Administration (SBA) 7(a) loan program in 2020 was $567,599. While fixed rate loans averaged $66,917, variable rate loans had an average balance of $150,647.

Traditional banks fail to help small businesses

The study is interesting because it highlights the reliance of small businesses on other sources of lending. With the Paycheck Protection Program (PPP) running out, small businesses must look to alternative solutions for financing.

As Hitendra Chaturvedi, Practice Professor, Supply Chain Management at Arizona State University, said of the major trends happening in the small business loan market: “The biggest trend that’s happening in small business lending is the coming of technology and data-driven business models, or fintech companies and COVID-19 is accelerating that. The sector that’s been hit the hardest has been small business, and traditional banks have failed to help them (just look at the troubled PPP rollout), because they are too big to be nimble and fintech has stepped in to capitalize on this opportunity.

New options for small business loans

AdvisorSmith’s research confirms the growing popularity of small business loans from alternative lenders. These lenders typically operate online and offer loans with more flexible terms and, in some cases, faster underwriting compared to traditional lenders.

The search lists the major alternative lenders and the range of loan amounts they typically lend.

At the top of the list is Bluevine, which provides loans between $5,000 and $250,000. Credably is another top alternative lender, providing small business loans ranging from $5,000 to $400,000. For small businesses looking for a lower loan amount, Lendio is a top provider, offering small business loans starting at $1,000 and ranging up to $500,000.

Traditionally, alternative lenders have been associated with higher interest rates. However, as AdvisorSmith notes, the space has become more competitive and as a result interest rates and fees have come down.

Alternative subscription sources

These lenders often use other sources of underwriting in loan applications, such as a company’s credit card sales and accounts receivable. As such, small business loans from alternative lenders are popular among small businesses that may not qualify for traditional bank loans.

The research validates the changing landscape of small business lending and borrowing in the United States. As traditional means such as PPPs and bank loans become increasingly difficult to obtain, small businesses are turning to alternative methods that rely on technology and are inherently more flexible.

With an abundance of alternative, flexible, data-driven loans available, it’s important that small businesses looking to secure financing do enough research to help identify the most suitable loan for their unique needs.

Image: Depositphotos


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