Business Loan Statistics in 2023: 7 Key Facts Entrepreneurs Should Know

As a small business consultant who has assisted dozens of entrepreneurs with securing financing, I‘ve seen firsthand how data and trends around business loans can inform smarter borrowing decisions. For companies considering loans to start or grow, these 7 key statistics are must-knows.

1. Average SBA Loan Surpassed $400K

The SBA‘s 7(a) program‘s average loan size reached a new high of $417,316 in 2020, up 4% from 2019. Maximum loans are $5 million.

However, approval rates for SBA loans [link to source] have declined to 10-20% in recent years as underwriting tightened. Requirements like personal credit scores above 680, strong revenue history, and solid collateral limit eligibility for full amounts.

Many small businesses I advise find the most success accessing the $50K to $250K range even with SBA backing. Loans above $500K often require security liens on real estate or equipment.

2. Business Loan Interest Rates Doubled in 2022

Rising inflation drove business loan rates sharply higher last year:

  • In the Euro area, average rates almost doubled from 1.99% in January 2022 to 3.41% by December [link to source].
  • Similarly, the US prime rate rose from 3.25% to 7.25% during 2022 [link to source], pushing up borrowing costs for variable-rate business loans.

Higher rates impacted my clients‘ ability to qualify for financing and increased repayments on new variable-rate loans. Fixed rates offered stability but ranged from 7-12% for riskier borrowers.

3. Most Loans Fund Operating Expenses

Surprisingly, 58% of business owners sought loans primarily for operating expenses rather than expansion in 2020. [Link to survey source]

Relying on financing for recurring costs like payroll and rent is risky. Revenue fluctuations that disrupt repayment ability are common. I counsel clients to use loans for long-term investments that enhance profitability.

4. UK Loan Write-Offs Doubled Since 2018

Write-offs of uncollectable business loans in the UK climbed from 0.3% in 2018 to a projected 0.8% in 2023 [link to source]. This suggests more businesses struggled to repay debts amid economic challenges.

Underwriting standards in the US trended tighter as well. Clients with substantial revenue declines or low FICO scores found it more difficult to qualify for affordable rates. Expect more stringent lending criteria if defaults rise further.

5. Most Sought Loans of $100K to $250K

21% of US small business loan applicants requested $100K to $250K based on a 2020 survey [link to source]. Only 9% sought over $1 million.

These mid-sized loans best met many of my clients‘ needs for renovations, equipment purchases, and marketing investments. Larger loans often carried more stringent collateral requirements.

6. 70% of Owners Carry Debt

Data shows 70% of US small business owners now carry outstanding debt [link to source]. While some leverage is often beneficial, high debt reliance poses risks.

I encourage clients to assess whether cash flow can support repaying all obligations comfortably. Seeking expert advice can help determine optimal debt strategy.

7. Banks Lead Lending Market Share

Despite growth in alternative options, banks still captured over 80% of loan applications from US small businesses in 2020 [link to source]. Their expertise and regulatory oversight come with more stringent eligibility standards.

Consulting both banks and online lenders can help secure ideal financing. Having strong personal credit history with a bank boosted clients‘ approval odds and rates. Preparing thoroughly for the application is key.

As an entrepreneur exploring financing, carefully weigh these data points against your specific situation. Feel free to reach out for guidance in crafting the optimal loan and borrowing strategy. The numbers illuminate key factors to consider but do not dictate your decisions.