Small Business Lending Statistics 2024: Trends, and Essential Financial Insights
Updated · Nov 27, 2024
Small businesses are the backbone of the economy, providing jobs, fostering innovation, and contributing to community development. Yet, one of the greatest challenges they face is securing the necessary funding to grow and thrive. Whether it’s for expansion, managing cash flow, or purchasing new equipment, small business lending is crucial. In 2024, as we navigate post-pandemic recovery and economic uncertainty, understanding the trends and statistics behind small business lending has never been more important. Let’s explore some key statistics and trends shaping small business lending this year.
Editor’s Choice: Key Lending Trends for Small Businesses
- $800 billion: Estimated total lending volume to small businesses in the US for 2024, reflecting a 10% increase from 2023.
- 70%: Percentage of small business loan applications that were approved by institutional lenders in 2024, up from 65% the previous year.
- 40%: Share of small businesses that rely on loans or other forms of credit to meet their day-to-day operational needs.
- The average loan size for small businesses increased to $660,000 in 2024, showing a growing demand for larger capital.
- Female-owned businesses received 27% of the total small business loans in 2024, compared to 22% in 2023, reflecting greater access to financing.
- Minority-owned businesses saw a 15% increase in loan approvals, signaling improvements in inclusivity within financial systems.
- $1.4 trillion: Total outstanding small business debt in the US as of the start of 2024, highlighting the significant role of credit in the small business sector.
What is Small Business Lending?
Small business lending refers to the various forms of financing options made available to businesses that typically have fewer than 500 employees. These loans can come from a variety of sources including banks, credit unions, and alternative lenders. Lending allows businesses to access funds for purposes such as expansion, inventory purchasing, hiring, or maintaining cash flow. Small business loans often come with specific terms that include interest rates, repayment periods, and loan covenants, which vary depending on the lender and the type of loan.
Types of Small Business Loans
There are several types of small business loans available in 2024, each suited to different needs:
- Term Loans: These are the most traditional form of lending, providing a lump sum that must be repaid over a set period, usually with fixed monthly payments.
- SBA Loans: Backed by the Small Business Administration (SBA), these loans often have lower interest rates and longer repayment terms, making them highly desirable.
- Business Lines of Credit: This revolving credit line allows businesses to draw funds as needed, similar to how a credit card works.
- Invoice Financing: This type of loan allows businesses to borrow against their accounts receivable, providing quick access to cash while waiting for payments from clients.
- Merchant Cash Advances: This option allows businesses to receive a lump sum upfront, which is repaid by taking a percentage of the daily sales.
- Equipment Financing: Used specifically to purchase equipment, this loan type often uses the equipment itself as collateral.
- Microloans: Ideal for startups or very small businesses, these loans are generally under $50,000 and are provided by nonprofit organizations or community lenders.
Small Business Loan Application Statistics
Applying for a loan can be a daunting process, but recent statistics provide insight into how small businesses are faring in 2024:
- 80% of small businesses applied for financing in 2024, up from 72% in 2023, showing a growing need for capital.
- Of those applicants, 65% received some or all of the funding they requested, a slight increase from 62% in 2023.
- Banks remain the primary source of small business loans, accounting for 50% of all loan approvals, while online lenders approve 25% of loans.
- $150,000 is the average amount requested by small businesses during loan applications in 2024, marking a slight rise from $145,000 in 2023.
- 30% of businesses that applied for loans sought funding to cover operating expenses, with 25% seeking capital for business expansion.
- 45% of businesses experienced delays or complications during the loan application process, citing stricter documentation requirements.
- 70% of small business loan applications were completed online in 2024, up from 60% in 2023, as digital banking continues to grow.
Percentage of Businesses That Had Their Loans Denied
Despite the growth in lending, a significant number of small businesses still face challenges in securing the funding they need. Here are some key statistics on loan denial rates in 2024:
- 24% of small businesses had their loan applications denied in 2024, an improvement from 28% in 2023.
- Businesses with annual revenues below $100,000 had the highest denial rate, at 35%, compared to 18% for businesses with revenues over $1 million.
- 50% of startups (less than 2 years old) were denied funding, highlighting the ongoing challenge for new businesses to access capital.
- 40% of businesses in the retail sector reported loan denials, one of the highest among industries, due to higher risk perception.
- The top reasons for loan denials included poor credit history (35%) and insufficient collateral (25%).
- 20% of minority-owned businesses experienced loan denials, a decrease from 30% in 2022, reflecting gradual progress in addressing lending inequality.
- 15% of businesses with existing loans were denied additional funding due to high debt levels.
| Business Characteristic | Denial Rate (%) |
| Overall denial rate | 24% |
| Businesses with revenues below $100,000 | 35% |
| Businesses with revenues above $1 million | 18% |
| Startups (< 2 years old) | 50% |
| Retail businesses | 40% |
| Minority-owned businesses | 20% |
| Businesses with high debt levels | 15% |
Average Credit Score for Loan Applications
Credit scores remain a critical factor in determining loan approval for small businesses. As lending criteria tighten in 2024, understanding credit score requirements is essential:
- The average credit score required for a small business loan in 2024 is 680, slightly higher than the 670 average in 2023.
- Small Business Administration (SBA) loans typically require a credit score of 700 or higher.
- Businesses with scores between 620 and 660 have a 50% chance of securing financing, depending on other factors such as revenue and collateral.
- 75% of loan applicants with credit scores above 720 were approved for loans in 2024.
- 20% of businesses with credit scores below 600 were approved, often through alternative lenders with higher interest rates.
- Credit score trends in 2024 show that businesses in the technology sector tend to have higher average scores, around 710, compared to 620 in the hospitality industry.
- 50% of small business owners actively worked to improve their credit score before applying for loans, using strategies like paying down debt and correcting errors on their credit reports.
Reasons for Funding
Understanding why small businesses seek funding can provide insight into economic trends and business priorities. In 2024, the reasons businesses apply for loans have evolved:
- 30% of small businesses applied for loans to cover operating expenses, such as rent and payroll, highlighting ongoing cash flow challenges.
- 25% of businesses sought loans for expansion purposes, including opening new locations or launching new product lines.
- 20% of loan applicants aimed to refinance existing debt, taking advantage of lower interest rates.
- 10% of businesses applied for loans to purchase equipment and update their operational infrastructure.
- 8% of small businesses needed loans to build working capital reserves for unforeseen expenses or emergencies.
- Startups accounted for 15% of all loan applications, with the majority requesting funding for initial capital and inventory purchases.
- 5% of businesses sought funding for marketing and advertising efforts, particularly to expand digital presence and customer reach.
Small Business Loan Demographics
The demographics of small business owners continue to shift, and loan statistics in 2024 reflect this change. Here’s how different demographics are accessing loans this year:
- 27% of small business loans in 2024 were issued to female-owned businesses, up from 22% in 2023.
- Minority-owned businesses saw a 15% increase in loan approvals compared to 2023, with Hispanic-owned businesses receiving 18% of total loans.
- Veteran-owned businesses received 7% of all loans, reflecting targeted efforts to support veterans transitioning into entrepreneurship.
- 60% of businesses owned by individuals under 35 years old applied for loans, while only 30% of owners over 55 years old sought funding.
- 50% of loan applications in 2024 came from businesses in urban areas, while 35% came from suburban regions and 15% from rural areas.
- 70% of minority-owned businesses that received loans applied through alternative lenders or online platforms, compared to 55% of non-minority-owned businesses.
- Female entrepreneurs reported higher success rates in receiving loans when working with credit unions, with 80% of applicants receiving some form of funding.
| Demographic | Loan Share (%) |
| Female-owned businesses | 27% |
| Minority-owned businesses (Hispanic-owned) | 15% |
| Veteran-owned businesses | 7% |
| Businesses owned by individuals under 35 | 60% |
| Businesses owned by individuals over 55 | 30% |
| Loans for urban businesses | 50% |
| Loans for suburban businesses | 35% |
| Loans for rural businesses | 15% |
Small Business Loans by Region
Geography plays a significant role in the availability and approval of small business loans. In 2024, certain regions have seen more favorable lending conditions:
- California, Texas, and Florida accounted for 30% of all small business loans issued in 2024, due to their large number of businesses and economic activity.
- Northeast US businesses saw the highest loan approval rate, at 72%, compared to 65% in the Midwest and 60% in the South.
- Businesses in urban centers like New York City and Los Angeles had an 80% loan approval rate, while rural businesses had a lower approval rate of 55%.
- Small business lending in the Pacific Northwest increased by 12% in 2024, driven by growth in the technology and green energy sectors.
- Southern states, particularly Georgia and North Carolina, saw an 8% increase in loan applications, with many businesses seeking capital for recovery from economic disruptions.
- Rural businesses continue to face challenges, with 40% of loan applications being denied due to limited access to lenders and stricter requirements.
- 50% of loans in Midwestern states were approved by community banks, which play a critical role in supporting small businesses in these regions.
| Region | Approval Rate (%) |
| Northeast | 72% |
| Midwest | 65% |
| South | 60% |
| Urban centers (NYC, LA) | 80% |
| Rural areas | 55% |
| Pacific Northwest (growth) | +12% |
| Southern states (growth) | +8% |
Small Business Loans by Lenders
Lenders play a pivotal role in providing funding options for small businesses, and in 2024, different types of lenders have varied approval rates and loan terms:
- Banks remain the top source for small business loans, accounting for 50% of all approved loans.
- Credit unions approved 15% of small business loans, often offering lower interest rates and more favorable terms than traditional banks.
- Online lenders have grown in popularity, accounting for 30% of all small business loans in 2024, up from 25% in 2023.
- Community banks approved 20% of loans, with a focus on local businesses and entrepreneurs.
- SBA-backed loans saw a 7% increase in applications in 2024, largely due to the attractive interest rates and longer repayment periods they offer.
- Microloans, typically provided by nonprofit lenders, accounted for 5% of the lending market, with the average loan size being $15,000.
- Peer-to-peer (P2P) lending platforms provide 10% of small business loans, offering an alternative for businesses that may struggle with traditional lenders.
Small Business Loans by Industry
Different industries have varying levels of access to small business loans, influenced by risk factors, growth potential, and lender preferences:
- Service-based industries, such as healthcare and education, accounted for 40% of all small business loans in 2024, reflecting their steady demand and lower risk.
- Retail businesses received 25% of loans but with higher interest rates due to the volatility in the sector.
- The construction industry saw a 15% increase in loan approvals, driven by infrastructure projects and real estate development.
- Manufacturing businesses secured 12% of loans, with many using the capital to invest in new technologies and machinery.
- Technology startups and firms in the information technology sector received 20% of all loan approvals, reflecting the industry’s growth and innovation.
- Hospitality and tourism businesses struggled to secure funding, with only 10% of loan applications approved, as the industry continues to recover from pandemic-related disruptions.
- Agricultural businesses saw a slight improvement in lending, with 8% of loans directed to farmers and food producers, focusing on sustainable practices and expansion.
Percentage of Businesses With Outstanding Debt
Many small businesses operate with outstanding debt, as borrowing is a common way to fuel growth and manage cash flow:
- 60% of small businesses have some form of outstanding debt in 2024, slightly down from 62% in 2023.
- 35% of businesses reported holding more than $100,000 in debt, while 20% carried debts exceeding $500,000.
- 75% of businesses with outstanding debt planned to refinance or restructure their loans to take advantage of lower interest rates in 2024.
- 50% of businesses with debt used it primarily for operating expenses, while 30% used it for expansion and 20% for equipment financing.
- 25% of businesses faced challenges in meeting their debt obligations, leading to increased reliance on revolving lines of credit.
- 10% of small businesses with outstanding debt defaulted on loans in 2024, a slight decrease from 12% in 2023.
- Businesses in the construction and manufacturing industries are most likely to carry high levels of debt due to the capital-intensive nature of their operations.
Average Interest Rates
Interest rates have fluctuated in 2024, impacting how small businesses access and manage their loans:
- The average interest rate for a small business loan in 2024 stands at 6.5%, a slight decrease from 7% in 2023, as central banks adjust rates to manage inflation.
- SBA loans typically offer lower rates, averaging 5.25%, making them a preferred option for businesses seeking long-term financing.
- Bank loans average around 6.8%, while online lenders charge higher rates, averaging 9.5% due to the increased risk and ease of access.
- Credit unions offer the most competitive rates, with an average interest rate of 5.75% for small business loans.
- Short-term loans (repayment periods under 1 year) come with higher interest rates, averaging 10%, as lenders charge a premium for quicker access to capital.
- Equipment financing loans have rates between 4.5% and 6%, often secured by the equipment itself, reducing risk for lenders.
- Microloans tend to have interest rates of 8%, reflecting their higher risk and smaller loan amounts.
Percentage of Small Businesses That Fail
Access to financing can often be the difference between success and failure for small businesses. Here are some failure rate statistics for 2024:
- 20% of small businesses fail within their first year, a consistent figure over the last few years.
- After five years, 50% of small businesses have closed their doors, often due to cash flow problems or lack of access to capital.
- 70% of businesses that failed cited lack of funding as a primary cause of closure.
- 30% of businesses that failed were in the retail sector, which continues to struggle with competition from e-commerce giants and changing consumer habits.
- 60% of small businesses that received loans within their first year of operation survived past the five-year mark, showing the importance of early access to capital.
- Businesses in rural areas faced a higher failure rate of 30%, compared to 20% in urban areas, largely due to limited access to resources and financing.
- Female-owned businesses had a slightly lower failure rate, at 18% in the first year, compared to 22% for male-owned businesses, often due to greater financial planning and support networks.
Impact of Small Business Loans on the Economy
Small business loans don’t just benefit individual businesses—they also have a ripple effect across the broader economy:
- In 2024, small business lending contributed approximately $1.4 trillion to the US economy, accounting for 44% of GDP generated by small businesses.
- 50% of new jobs created in 2024 came from small businesses that received loans for expansion or operational growth.
- 75% of small businesses reported increased productivity after securing loans, allowing them to invest in new technologies, staff, and equipment.
- 60% of businesses that received loans were able to hire more employees, contributing to the reduction of unemployment rates in their communities.
- 40% of businesses that received loans expanded into new markets, both domestically and internationally, contributing to economic growth and innovation.
- Loans directed towards minority-owned businesses resulted in a 10% boost in local economic activity in underserved areas, fostering community development.
- SBA-backed loans alone helped create or retain 600,000 jobs in 2024, highlighting their critical role in sustaining small business growth.
Recent Developments in Small Business Lending
2024 has seen several key developments in the small business lending landscape, driven by technology, regulation, and economic conditions:
- Fintech lenders have grown their market share, with 40% of small businesses turning to these digital platforms for quicker, more accessible loans.
- Blockchain technology is being tested by several lenders to secure transactions and reduce fraud in small business lending.
- New regulations have improved transparency in lending, requiring online lenders to disclose interest rates and fees more clearly.
- Green financing options for small businesses have expanded, with $5 billion in loans issued to companies focusing on sustainable practices.
- Artificial intelligence (AI) is being used to assess creditworthiness more efficiently, with 30% of loans in 2024 being processed using AI-powered tools.
- Community development financial institutions (CDFIs) have become more active, issuing $10 billion in loans to underserved communities in 2024.
- Cryptocurrency-backed loans are now being offered by some fintech firms, allowing small businesses to leverage their digital assets for financing.
Conclusion
Small business lending in 2024 presents both opportunities and challenges. As businesses navigate economic recovery, access to capital remains critical for growth, innovation, and survival. With advancements in technology, greater inclusivity, and more flexible lending options, small businesses have more avenues than ever to secure the funding they need. However, navigating this landscape requires careful planning, strong credit profiles, and an understanding of the various lending options available.
Barry Elad is a dedicated tech and finance enthusiast, passionate about making technology and fintech concepts accessible to everyone. He specializes in collecting key statistics and breaking down complex information, focusing on the benefits that software and financial tools bring to everyday life. Figuring out how software works and sharing its value with users is his favorite pastime. When he's not analyzing apps or programs, Barry enjoys creating healthy recipes, practicing yoga, meditating, and spending time in nature with his child. His mission is to simplify finance and tech insights to help people make informed decisions.
