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Launching a startup business is exciting, but it can also be stressful if you need external money to keep the momentum going. While the U.S. Small Business Administration offers several small business loans for established companies, there are also some loan options available to new ventures. This guide will cover SBA funding for startups, as well as how to apply. We’ll also cover the SBA loan requirements for startups, and alternatives for capital if these loan types won’t work for your business.

SBA Loans For New Startups

While there’s no specific SBA startup loan, there are two financing options available to newer businesses: the SBA microloan and the SBA Community Advantage Program. Each one has its own loan terms and eligibility requirements, and can help serve brand new businesses that are just starting out.

SBA Microloan

An SBA microloan for startups allows businesses to borrow up to $50,000. The average loan size, however, is much smaller at $13,000. The maximum loan term is seven years. These smaller loans are geared towards early-stage businesses, so have less strict eligibility requirements than other SBA loans and traditional loan options.

Ideal for: Managing a new business and providing working capital.

Can be used for: Working capital, inventory, supplies, equipment, furniture or fixtures.

Cannot be used for: Paying existing debt, settling lawsuits, trade disputes, fines, penalties, or purchasing real estate.

Eligible businesses: For-profit small business or nonprofit child care center.

Application Process: Even when choosing to use an SBA loan to start a business, you’ll still need to apply directly through a lender. Lenders typically require collateral and a personal guarantee in order to get approved for a microloan. Read our guide to learn more about applying for an SBA microloan.

SBA Community Advantage Program

Historically underserved communities may be eligible for the Community Advantage Program for a SBA loan for their startup. It’s specifically designed to help new entrepreneurs in underserved markets obtain working capital. You can borrow up to $350,000 over the course of 10 years through Community Advantage Small Business Lending Companies (CA SBLCs)  Originally begun as the Community Advantage Pilot program that sunsetted September 30, 2024, the Community Advantage Program is now a permanent part of the SBA 7(a) loan program, through new licenses issued to previous lenders in the program who can now issue 7(a) loans to traditionally underserved businesses.

Ideal for: New businesses located in low-to-moderate income communities that are less than two years old.

Can be used for: Purchasing commercial real estate that the owner occupies, leasehold improvements or renovations, purchase of inventory, equipment, furniture, fixtures, working capital, business acquisition, or debt refinance for any of the above.

Cannot be used for: Illegal businesses or businesses that do not meet the eligibility requirements, delinquent taxes, investment real estate, or personal use.

Eligibility requirements: Eligible businesses must be part of an underserved market. There are several ways to qualify for this designation, such as:

• Businesses located in Low-to-Moderate Income Communities, Empowerment Zones and Enterprise Communities, Historically Underutilized Business Zones, Promise Zones, Opportunity Zones or Rural Areas
• New businesses that have been operating for less than two years
• Veteran-owned businesses that are 51 percent or more owned and controlled by one or more veterans
• Businesses where more that 50% of the full-time workforce is low-income or resides in LMI census tracts.

Interested in exploring loan options, including SBA loan products like microloans and 7(a) loans, for your new business? Compare loan offers from multiple lenders with Lendio. Applying is free, and won’t impact your credit. Apply now! 

SBA Loans For Established Startups 

Once your startup has reached two years old, the options for SBA loans expand. The following options have their own eligibility requirements.

SBA 7(a) Loan

SBA 7(a) loan funds can be used for a number of purposes. The maximum loan amount is $5 million, and any loan amount over $25,000 requires collateral. Loan repayment terms can vary depending on what the loan is used for, but the repayment period is usually 10 years.

Ideal for: Businesses who have reached the growth stage.

Can be used for: Working capital, equipment, supplies, real estate, debt refinancing and ownership changes.

Cannot be used for: illegal or unqualified business as defined by the SBA, delinquent taxes, investment real estate or personal use.

Eligibility Requirements: Each SBA lender's criteria may vary for an SBA loan. For example, some may require a higher credit score than other lenders. However, at minimum you must have owner equity and engage in for-profit operation in the U.S. or its territories. Read our guide for more information about SBA 7(a) loan requirements.

SBA 504 Loan

The SBA 504 loan is designed to help small businesses make major investments. Funds can be used for long-term assets such as real estate (including updates), land, equipment, machinery, or improvements to land, parking lots, and utilities. You can’t use the funds for working capital or inventory. If approved, you could borrow up to $5 million over a period of 10 or 20 years. 

Best For: Purchasing or upgrading major fixed assets for your business.

Can be used for: Real estate, land, equipment, machinery, or improvements to utilities, parking lots, and the above.

Cannot be used for: Working capital or Inventory purchase.

Eligibility Requirements: Like 7(a) lenders, 504 lenders may set more stringent criteria to access an SBA 504 loan. In most cases, you will need strong credit history, finances, and multiple years in business to qualify. Read our guide for more details on SBA 504 loan eligibility requirements! 

Explore Lendio to find the right SBA loan option for your startup, so you can start making the business moves you need to succeed.

How to Get an SBA Loan for Startups

In order to pursue an SBA loan for your startup and increase your chances of receiving a loan, you’ll want to do some preparation first. Here are the steps to take to prepare and submit an application for an SBA loan.

1. Calculate your Startup Costs

Knowing how much you need to borrow is your first step. Pull together the costs of starting your business, including one-time costs for permits, licenses, equipment, furniture and fixtures. You’ll also need to calculate recurring expenses, such as payroll, rent, and inventory for at least your first year in business. 

Calculating your business startup costs will give you an idea of how much money you will need to get your business off the ground.

2. Write Your Business Plan

Many lenders will want to see your business plan, including research on target market, pricing structure, marketing costs, challenges, and your industry competition. Your startup costs calculation also belongs in your business plan, as well as projected income.

Without multiple years of profits to lean on in your application, you’ll need to use these tools to show that your business will be a success, so spend some time writing a business plan to help you secure funding.

3. Review SBA Loan Qualifications

All your hard work will be for nothing if you start the loan application process only to realize you won’t qualify. First, review the standard SBA loan requirements. You’ll need to:

• Be a for-profit business operating in the U.S.
• Meet the Small Business Administration’s definition of a small business.
• Be able to show your ability to repay the loan.
• Have tried to find alternative forms of funding before trying to get an SBA loan.

Because SBA loans are issued through lenders, you’ll also need to review common requirements for underwriting loans to improve your chances. Your personal credit score and business credit score should be improved as much as possible before pursuing a loan, and you’ll need to gather cash flow, sales projections and any available collateral you may have for the loan.

4. Choose a Loan and Lender for Your Startup

After reading some of the available options above, you probably have an idea of which SBA startup loan option will meet your needs. From there, you’ll need to find the best SBA lender for your startup..

The SBA provides a Lender Match tool to help you find a bank, credit union, or community-based lender that participates in your chosen loan program. You can always double check with a financial institution you’ve previously had a relationship with to see if they participate in the loan program you’re searching for.

You can also apply through Lendio to be matched with funding options that best suit your business needs. It takes 15 minutes to complete the application, and you’ll be put in front of 75+ lenders, including those who offer SBA loan options.

5. Prepare Your Loan Application

After you’ve chosen a lender, you’ll be ready to start your SBA loan application. You’ll need a lot of documentation to support your application, but there may be some variations on specific documents you need based on your loan program and lender.

Prepare all your business and personal documentation, including tax returns, financial statements, certificates and licenses, business history, business plan, contracts and more. 

You’ll also need to complete some SBA forms, such as SBA Form 1919 Borrower Information Form, SBA Form 912, Statement of Personal History, and SBA Form 413, Personal Financial Statement.

Thankfully, your lender will be able to help you through the application process and make sure you have all the required documentation.

Online Business Loans

Many online lenders have flexible qualifications and multiple loan products for startups. If you’re looking for funding fast, exploring these options can be a great way to get funding, sometimes in as little as 24 hours. Curious what kind of loan options might be best for your business? Visit the Lendio Industry funding resource center to select your industry and see loan type recommendations for your business.

Small-Business Grants

Grants for small businesses are a way to avoid accumulating debt by offering capital that you don’t have to repay. The application process may be time-consuming, but if you can secure funds this way it may be worth it for your business.

Business Credit Cards

If you need help with everyday expenses while launching your business, business credit cards for startups are a great way to build your business credit score with responsible management and earn rewards that benefit your business.  

Get Funding for Your Startup

Now that you know the SBA loan options for your startup, as well as how to apply and some alternatives to consider, it's time to figure out which loan option you’re going to pursue. Let Lendio take some of the guesswork out of funding your startup with the Lending Marketplace.

Simply fill out an application, and receive offers from our network of 75+ lenders to compare your funding options. There’s no impact to your credit score, and once you accept an offer, you could receive the funds you need for your startup in as little as 24 hours.

*All information included in this article was current on its publication date and is subject to change.

Because business credit cards don’t require collateral and are easy to use and apply for, they’re a very common way for small businesses to secure a boost of funding. If you’ve ever applied for a personal credit card, you know you need to input your Social Security number (SSN), a unique 9-digit number that identifies you as an individual with the United States government, including the Internal Revenue Service.

For small business owners, there are other ways to identify yourself and your business when applying for credit cards—most commonly, businesses have an Employer Identification Number or EIN. You can apply for some corporate business credit cards using an EIN only.

EIN-only Corporate Business Credit Cards

In general, it's rare for individuals to apply for a credit card without providing their Social Security Number (SSN), even if they have an Employer Identification Number (EIN). This is because most credit card companies require a personal guarantee, which necessitates an SSN. 

However, some business credit cards only require an EIN. These are largely corporate cards created for businesses with large revenue streams, where approval is based more on your company's financials rather than your personal credit history.

If your business qualifies, here are some options from Stripe, Brex, and Ramp.

Stripe Corporate Card

This card is only available to current Stripe users who have received an invitation. The credit limit is based on the business's payment processing and bank history. The card comes equipped with custom spend controls, real-time expense reporting, and integrations with Quickbooks and Expensify. Additionally, it offers 1.5% cash back on every business purchase.

Brex Corporate Card

The Brex Corporate Card is designed for startups, e-commerce, and tech companies. It offers higher credit limits, rewards on key business spending categories, and streamlined expense management tools. It doesn't require a personal guarantee or credit check and offers up to 7x points for cash back or credits, depending on the expense type.

Ramp Corporate Card

Ramp offers a charge card for small businesses with unlimited 1.5% cash back. Applying requires no personal credit check or personal guarantee. The card comes with a dashboard for managing expenses and integrates with major accounting software. Ramp will accept applications from any incorporated business in the U.S. with at least $75,000 in a U.S. business bank account.

EIN-only Business Fuel Cards

Fuel cards are another option for companies with large fleets of trucks or equipment, like the transportation and trucking industry.

AtoB

AtoB’s fleet fuel card is accepted at 99% of gas stations nationwide and can be used for expenses beyond fuel such as repairs or road tolls. The card comes with an average fuel discount of 46¢ per gallon on truck diesel. Monthly card fees start at $15. While you only need an EIN to apply, the card will help you build business credit.

Alternatives to EIN-Only Business Credit Cards

If you’re looking for an alternative to a corporate card, or business credit card using only your EIN, the following business credit cards will require a social security number to apply.

Capital One Spark 2% Cash Plus

The Capital One Spark 2% Cash Plus is a straightforward option with 2% cash back on everything you spend. This is a charge card, so the full balance must be paid back in full each month. There is a $150 annual fee that will be refunded if you spend $150,000 or more each year.

Chase Ink Business Cash Credit Card

Featuring no annual fee, the Chase Ink Business Cash Credit Card is a popular option because of its competitive rates of 18.24% to 24.24%* and $750 bonus cash back.

Capital on Tap

Capital on Tap offers up to a $50K credit limit with unlimited 1.5% cash back and no annual fee. They review your credit history but use a soft pull that won’t impact your credit.

Why is a social security number usually required for business credit cards?

In most cases, you’ll have to provide an SSN on a business credit card application—even if you provide an EIN. Because credit cards are unsecured, credit card companies want to ensure someone is liable for the card’s debt, even if a business is dissolved. This personal guarantee is a layer of security for the credit card issuer.

Compare financing options with Lendio.

Lendio simplifies the process of finding the right funding option for your business. Our platform allows you to compare financing options from over 75 lenders, each with unique funding options and requirements. Compare options.

If you're a small business owner looking for financing options, you may have come across the term “SBA loan.” But what exactly is an SBA loan?

In this blog post, we’ll dive into the details of what SBA loans are, the pros and cons, and how to apply, while helping you understand if getting an SBA loan is the right option for your business.

SBA Loans

1. What is an SBA loan?

2. How do SBA loans work?

3. Types of SBA loans

4. Pros of SBA loans

5. Cons of SBA loans

6. What is required to get approved for an SBA loan?

7. Is it hard to get approved for an SBA loan?

8. How long does it take to get approved for an SBA loan?

9. How to get an SBA loan

What is an SBA loan?

Small Business Administration (SBA) loans are government-backed loans designed to help small businesses access the funding they need to start, grow, or expand their business.

SBA loans are partially guaranteed by the SBA, making them less risky for lenders, and therefore, more accessible to small businesses. These loans are not directly provided by the SBA, but rather through participating lenders such as banks and credit unions.

What does SBA stand for?

SBA stands for the Small Business Administration, a U.S. Government agency that supports small businesses by giving them access to capital, counseling, and other community resources.

How do SBA loans work?

Unlike traditional loans where the lender assumes all the risk, an SBA loan is backed by the government.

This means that if a borrower defaults on their loan, the SBA will partially reimburse the lender for their losses.

This guarantee reduces the risk for lenders and encourages them to provide loans to small businesses, even if they have lower credit scores or less established financial histories.

What can you use an SBA loan for?

Types of SBA loans

There are several types of SBA loans available, each designed for different purposes and needs of small businesses. Here are the most common types:

SBA 7(a) loans

SBA 7(a) loans are the most common and flexible type of SBA loan. They can be used for a wide range of purposes, including working capital, equipment purchases, real estate, and refinancing existing debt.

Visit the SBA website to read more about SBA 7(a) loans.

SBA 504 loans

SBA 504 loans are specifically designed to help small businesses purchase major fixed assets such as machinery or real estate. These loans are provided through Certified Development Companies (CDCs), private, nonprofit corporations set up to contribute to the economic development of their communities. 

The benefit of an SBA 504 loan is that it offers long-term, fixed-rate financing, making it a more affordable option for businesses looking to make major investments.

Read more about SBA 504 loans here.

SBA microloans

The SBA microloan program provides smaller loan amounts for businesses that need just a small injection of funds. These loans are designed to help startups, microbusinesses, or non-profit child care centers with their various needs, whether it's working capital, inventory, supplies, or equipment. The maximum loan amount under the microloan program is $50,000, but the typical loan size is much smaller, often averaging around $13,000. 

The exact terms of the loan depend on how much you borrow, what you'll use the loan for, and your own financial circumstances. This type of SBA loan is unique in that it is provided through non-profit community lenders who also offer business training and technical assistance, making it a comprehensive package for first-time entrepreneurs and small business owners.

Learn more about microloans and see a list of microlenders here.

SBA disaster loans

SBA disaster loans are designed to provide financial support to businesses, homeowners, and renters affected by declared disasters. Unlike other types of SBA loans, disaster loans are directly funded by the SBA, not through lenders. They offer low-interest, long-term loans for physical and economic damage caused by a declared disaster. 

Businesses of all sizes, homeowners, and renters can apply for a physical disaster loan to repair or replace damaged property, while businesses and non-profit organizations can apply for an economic injury disaster loan to help meet working capital needs caused by the disaster. The SBA will determine the loan amount and term based on each borrower's financial condition.

Read more about SBA disaster loans here.

SBA loans vs. conventional loans

Since SBA loans are government-backed, there are a few specific differences to call out relative to conventional loans.

1. You can qualify with a much younger, riskier business profile. Conventional loans typically require at least 6 months of time in business, whereas SBA loans work with eligible startups. Since lenders shoulder less risk from the actual loan, they’re willing to take on more risk from the lender.
2. SBA loan amounts are capped at $5.5 million. Conventional loans don’t have defined limits, and can vary more greatly.
3. SBA loans have a longer approval time. Since you have to meet requirements for both the lender and the government, approval can take more than 30 days. For conventional loans, approval can happen in just a few days.
4. SBA loans have capped interest rates. While SBA loans may not offer the lowest possible interest rates, they keep the ceiling of interest lower than conventional loans. See current SBA loan rates here.

Eligibility requirements for an SBA loan

Is it hard to get approved for an SBA loan?

Given the combination of personal and business requirements, it’s moderately difficult to get approved for an SBA loan—not easy, but not overly difficult. A large part of the approval process revolves around your personal history and available financial resources.

To qualify for an SBA loan, you must meet the following requirements:

• Your business must operate in the US and be legally registered
• Your business must fall under the SBA's definition of a small business
• You must have invested your own time and money into your business before seeking outside funding
• You need to have a good credit score (typically above 680) and a solid financial history
• Collateral may be required, depending on the type of loan you apply for

Pros and cons of SBA loans

Application process for an SBA loan

Applying for an SBA loan requires you to know a lot about your business, and requires a combination of personal and business-specific paperwork to submit successfully.

1. Understanding the numbers behind your business:

To qualify for an SBA loan, it’s important to note that your business should have been operational for a reasonable period of time. Many lenders prefer businesses to have been in operation for at least two years.

This is to ensure that your business has a proven track record and demonstrates stability and the ability to generate consistent revenue.

In terms of credit score, a personal score of at least 680 is generally preferred by most lenders. This high credit score showcases your reliability and ability to repay the loan.

Otherwise, you need to know your business down to the dates and dollars its comprised of. Are you able to prove profit and loss and cash flow for your business? Can you show both historical numbers and future projections to prove you’re generating revenue?

You should be prepared to show all money in and out, taxes, and any existing debt.

2. Making sure you have the proof:

Do you have all the documentation needed to prove the dates and dollars mentioned above?

This includes fundamental business and financial documents, such as your business plan, personal and business income tax returns, personal and business bank statements, and a balance sheet. You’ll also need to provide financial projections, ownership and affiliations, business license, loan application history, and business lease.

3. Finding an SBA-approved lender in your area:

Your next step is to find an SBA-approved lender in your area. This could be a traditional bank, a Community Development Company (CDC), or a microlender, depending on your needs.

The SBA has a free online Lender Match tool that can connect you with participating SBA-approved lenders within 48 hours. They also provide lists of CDCs and microlenders.

When choosing a lender, consider factors such as their SBA loan expertise, the types of businesses they typically work with, and their understanding of your industry. Building a relationship with your lender can be beneficial, as they could provide valuable guidance throughout the loan application process.

4. Submitting your application.

After you’ve gathered all necessary documentation and found an SBA-approved lender, you’ll need to package your paperwork together alongside SBA forms 1919 and 413.

Your lender will guide you through the application process and help you submit all required documents.

How long does it take to get approved for an SBA loan?

The timeline for approval can vary depending on the type of loan you apply for and the lender's processing times.

Typically, the application process can take anywhere from one to three months (30 to 90 days), while the funds can take an additional one to two weeks to be disbursed.

What happens to an SBA loan if your business closes?

Sometimes it happens—your business closes. In that case, what happens to your SBA loan?

Like any other loan, you need to continue making payments, or else you’ll go into default, where lenders can begin to seize collateral.

The SBA does compromise in some cases. Via their Offer in Compromise (Form 1150), businesses that default on their loan are able to apply for a settlement of a lower amount if paid in full more immediately. In this case, the loan is considered paid off.

Generally, the most important thing to keep in mind—you’re responsible for the money owed to the lender no matter what.

SBA loans can be an excellent financing option for small businesses looking to grow or sustain their operations. With an understanding of your requirements, you can begin to search for an SBA lender today.

As a small business owner, financing backed by the U.S. Small Business Administration (SBA) represents some of the most affordable types of business loans available. SBA loans are a popular option for both startups and established businesses alike. These loans tend to feature low interest rates, higher loan amounts, and generous repayment terms compared to other business loan options. 

At the same time, understanding how to apply for an SBA loan and qualify for this type of financing can be complicated. The SBA loan application process can be tedious, and if you don’t complete it properly, you could hurt your chances of getting a loan approval. 

That’s why Lendio has put together a complete guide to applying for an SBA loan, including types, requirements, the application process, and how to improve your chances of approval.

Step 1: Decide which type of SBA loan you need.

There are several different types of SBA loans available to small businesses. With SBA loans, your business may be able to borrow up to $5 million and repay those loans over a period of 10 to 30 years. (Repayment terms can vary.)

You can find SBA loans to help you finance many different aspects of your business needs. Whether you need startup funding, working capital, equipment financing, inventory financing, or funding for some other type of business need, you may be able to find an SBA loan to support your goals. 

First, Ask yourself a few key questions about your business needs to find the right SBA loan program for your needs, like:

• How much funding do I need?
• What will I use the funding for?
• What is the minimum repayment term I need to work with?

Once you figure out the type of SBA loan you want, you can determine if your business is eligible for the loan program. 

Step 2: Check eligibility requirements

The specific eligibility requirements that your business needs to meet in order to qualify for an SBA loan will vary based on a few factors. First, each SBA loan program has unique requirements you must meet to qualify. In addition, you may need to satisfy additional loan requirements that your SBA-approved lender requires from small business borrowers. 

The minimum requirements for most SBA loans are as follows. 

• Be an operating business
• Operate for profit
• Be located in the U.S. or in U.S. territories
• Can meet SBA “small business” size requirements 
• Not be a type of ineligible business
• Be creditworthy and demonstrate reasonable ability to repay the loan
• Collateral to secure a large percentage of the loan
• Unable to access business financing through non-government means (not including personal funds)

If you meet these requirements, then the next step is confirming that you qualify with an SBA lender, and this is where it can get complicated. Let’s go over some major eligibility requirements with most SBA-approved intermediary lenders as lender standards vary.

Creditworthiness Requirements

SBA 7(a) loans and SBA 504 loans are issued by traditional lenders, so they will have more stringent credit criteria than other loans, like microloans.

Most lenders for these loans will want to see a FICO® credit score of 650 or above.

On the other hand, SBA microloans have less strict credit criteria, and you may be able to qualify with limited credit history.

Time in Business Requirements

Like credit criteria, SBA 7(a) loans and SBA 504 loans will require more time in business and proof of revenue than microloans.

Most lenders will want to see at least two years in business for 7(a) and 504 loan applicants. In contrast, lenders may not require as much time in business for the microloan program, with some lenders only requiring six months in business.

If you meet these eligibility requirements, the next step is to gather all the documentation you will need for the application process.

Step 3: Prepare documentation for SBA loan application

Before you apply for an SBA loan, it’s important to gather the documentation your lender will request on your application. The time it takes to move through the SBA process from application to funding will vary.

While it might take 30 to 90 days with your local bank, Lendio, on average, can close an SBA 7(a) small loan in less than 30 days. Having your documents prepared ahead of time may help improve your chances of approval and could help you move forward through the SBA loan process at a faster pace.

Below is a list of the documents you should prepare for your SBA loan application:

• Six months of business bank statements (connect account or manually upload images)
• Copy of your driver’s license or state ID
• Voided check from your business account
• Month-to-date transactions
• Two years of business and personal tax returns (for all business principals with 20% or more ownership)
• Debt schedule
• Year-to-date profit and loss statement
• Year-to-date balance sheet
• Cash flow projections
• List of collateral
• Business certificates or licenses
• Loan application history
• Business owner resume(s)
• Business plan
• Business lease, if applicable

Additional SBA loan application requirements.

In addition to the documents listed above, you should be prepared to include more information on your SBA loan application. Details you may need to provide include: 

• The amount of money you want to borrow.
• The purpose of the loan and how you plan to use the proceeds if approved.
• Assets you need to purchase and the name of your business suppliers.
• When your business started.
• General information about your business (owners, affiliations, etc.).
• Your birthday and your Social Security number
• Details regarding other business debts and your creditors.

Anyone who owns 20% or more of the business will generally need to fill out an SBA loan application form, as the SBA requires that anyone with 20% or more ownership in the business provide an unlimited personal guarantee.

Owners with less than 20% ownership can provide full or limited guarantee. Owners will also need to complete a personal financial statement, called SBA Form 413. SBA uses the personal financial statement to assess risk and help determine an applicant’s ability to repay as promised. 

Here's a list of SBA-specific forms to include in your application package:

• SBA Form 1919 - Borrower Information Form
• SBA Form 912 - Statement of Personal History
• SBA Form 413 - Personal Financial Statement
• SBA Form 148 - Unconditional Guarantee (or lender’s equivalent to this form.)
• SBA Form 148L - Limited Guarantee (or lender’s equivalent) for owners with less than 20% ownership

Step 4: Find an SBA-approved lender

You can use an SBA loan to support your small business in many different ways. Once you feel ready to begin your SBA loan application, you can start by choosing an SBA lender to guide you through the process. 

Depending on the type of SBA loan program you are applying for, you might have a few different options for finding an intermediary lender. Since SBA 7(a) loans and SBA 504 loans lenders are more traditional financial institutions, you can try reaching out to a bank you have a previous relationship with.

The SBA also offers a few resources for finding active certified development companies (cdcs) and active microlenders on their website.

If you would like to connect with lenders directly, you can use the SBA’s lender match system. You’ll fill out a questionnaire about your business, and in two days, you’ll receive an email with possible lender matches. 

Lendio offers a convenient SBA loan application process. Potential borrowers can complete an application and get a preapproval within 24 hours, and after providing the documentation listed above, can get funded with a 7(a) small loan in less than 30 days.

Step 5: Submit your SBA Loan Application Package

Once you’ve prepared your loan application package, it’s time to submit it to the lender. Don’t be surprised if they may follow up with questions, or request for additional documents. Every lender has different requirements, so work with your contact to provide everything they need to begin the initial underwriting process to review your application.

If your lender decides to move forward, you can expect a “loan proposal” or “letter of intent” to follow. This document will detail your request, loan terms, and deposits, fees and/ or closing details.

If you accept and sign the proposal, you’re not out of the woods yet. Your lender will begin a formal underwriting process, in which both the lender and the SBA review your application, documentation and credit history thoroughly.

If you are approved after this process, you will be notified and provided a letter of commitment. You must accept it in order to receive closing documents and start the closing process. Once everything is signed and the process is complete, your money will be disbursed.

What to do if your SBA Loan application is denied

Although it's not the outcome you want, only about one-third of SBA loan applicants were fully approved in 2023. A decline is not uncommon, so knowing your options if this happens will help you plan for your next steps.

If your application is denied, your lender will provide you with a letter explaining the reason you were denied, and may provide some options for you after that. You may be able to appeal the decision, for example, and your lender can provide insight.
Read our guide on common reasons why your SBA loan application may have been declined, and what to do next.

Alternatives to SBA Loans

If you aren’t able to find a workaround in the event that your SBA loan was declined, or if you aren’t confident you meet the eligibility requirements, here are some other alternatives to consider:

• Equipment financing- if new equipment upgrades, repair or replacement is what you need, consider exploring term loans or leases for equipment.
• Term business loans - If you don’t qualify for an SBA loan, you may still be able to obtain a business loan paid off with equal payments at a fixed rate through other lenders.
• Business lines of credit- Opening a line of credit enables you access to funds that you can borrow anytime up to your credit limit.

Perhaps your restaurant has lines snaking out the door. Or your tax business has identified a prime market in another city. Or your medical practice has more patients than the available space can accommodate. Maybe you just have enough capital to support immediate business expansion.

Scenarios like these certainly indicate that another location would be great. 

What should you look for when opening a second location for your business? We’ll address what you should consider, and how to identify the right location.

Opening a second location for your business.

Here are a handful of questions you can ask yourself to get a clearer picture of whether or not expansion would be wise:

• Is your business space limiting your ability to serve customers?
• Is there a new market you can serve (or are already serving digitally)?
• Do you have the capital necessary to expand?
• If not, do you have access to additional capital?
• Can the factors that have made your first location successful be duplicated?
• Do you understand the legal ramifications of opening a second location?

If you answered yes to three or more of these questions, consider your business a prime candidate for expansion.

Potential alternatives to opening a second location.

If you haven’t, it could be worth exhausting all other sales channels before opening a new location. If you rely on brick-and-mortar sales, it might be worth exploring ways to digitally meet demand, before opening a new branch of business.

“You may be able to grow your business by building a website, eliminating the need for considerable funding and the risk associated with opening a physical store,” according to business expansion strategies from Entrepreneur. “For many businesses, the internet offers low-cost access to a national market, with large numbers of potential customers. The viability of the internet marketing medium for your business is a function of your business’s ability to successfully and profitably deliver your products and services outside your existing local market.”

You could expand digital sales to new geographies, increase your fleet operations, or offer more virtual options for services (think, telehealth, for example).

This requires its own set of considerations (e.g., outsourcing new warehouses or fleet services, having teams that manage digital websites and workflows), but it may present cheaper, easier, and less risky options for expanding your business.

If you’re certain that a new location is the way to go, there’s a lot to consider when choosing the actual location.

How to find a second location for your small business.

Here are 10 considerations that will aid you in choosing the right location and setting yourself up for success once you move in:

 What to consider

1. How much the venture will cost.

You can’t make solid business decisions until you know the price tag. Don’t simply focus on the cost of the physical property—you’ll also need to take into account utilities and other operational expenses. This requires that you have a deep understanding of the expenses at your current location.

If so, you can scale those numbers relative to the new location to project what you’d actually be on the hook for, and what kind of returns you might see.

2. How you’ll continue what has made you successful.

Many entrepreneurs capture something special with their first business location. Whether it’s the location, ambiance, staff, or a combination of many factors, customers are consistently drawn to that store. Your challenge is to transfer what’s working to your next location.

This can be difficult, as the details associated with the store or office will undoubtedly differ from your first. For this reason, it’s more of a translation than a straight transfer. You’ll need to find a way to effectively incorporate the best parts of your business into a new place.

3. How you’ll improve upon what has made you successful.

Don’t stop at simply replicating your first location. This is your chance to transcend the status quo. Look for at least five ways you can elevate your operations, with a particular focus on the customer experience. It’s a fresh start on an existing concept. 

Opening a new location can be stressful—that’s when you run the risk of losing sight of your customers.

You can add new inventory in the new store or offer exclusive promotions. By improving things at your new location, you’ll benefit your operations across the board.

4. The foot traffic in the area.

Even if your business is primarily driven by advertising or referrals, don’t underestimate the importance of foot traffic. The more people passing by your business, the better. So when choosing a location, look for somewhere people care about and visit often. You can get a general idea of foot traffic by simply spending time in a potential area. Beyond that, don’t be afraid to visit with other business owners in the neighborhood and ask them about the foot traffic they experience on a monthly basis.

5. Car traffic in the area.

Another important aspect of your business will be vehicle traffic. Will a lot of potential customers be driving in the area of your new business? Will there be too many cars in the area? If so, parking and accessibility could become a problem for you, your staff, and your customers.

This is another opportunity to speak with local businesses and get their insights on the traffic situation. If there are too few people driving in the area, or there are congestion problems, be wary of setting up shop in the midst of them.

6. Understanding the competition.

On the topic of neighboring businesses, it’s important for you to find out what competitors are already established there. This isn’t just to avoid setting up your business next door to someone who already does what you do. It’s to see how other local businesses promote their products or services.

You can never stand out if you don’t know what you’re standing around. It’s important to find an area where customer needs aren’t being met. Perhaps there’s a business on the same block that is similar to yours, but if you can articulate why yours will be more effective at serving customers, you have a strong chance of succeeding.

7. Establishing a network.

Opening a second business location is never an easy endeavor. Rather than go at it alone, leverage other businesses and contacts in the local area. Not only will this help you gain insider knowledge of your new market, but you’ll make contacts that can boost your awareness. Even the briefest of conversations with other small business owners can yield strong results, as they may then go on to consciously or subconsciously promote your business.

A good way to get your foot in the door is to join any business organizations in your new neighborhood. Each event you attend is another way to rally support for your business and make a few friends along the way.

8. Keeping your eye on the horizon.

Your network will be an excellent source of information regarding the future of your second business location. What’s in store for the region? For example, housing and transportation projects can be gold mines, as they bring more potential customers into your radius.

On the flip side, be aware that the current condition of a potential location is never set in stone. Many small businesses have struggled when undesirable businesses or projects emerged in their vicinity. The more you know in advance, the less you’ll need to worry about this happening to you.

9. Accounting for logistics.

A new location means you’ll need to figure out how to handle shipping and receiving, parking, and a host of other nuances. You can take best practices from your current business location, but plan that many may need to be retrofitted. It can be helpful to talk to your employees about their unique roles and how they would recommend tackling the new logistical approaches your second location will demand.

10. Rent first, buy later.

There are times when you feel confident buying the property for a second location. Perhaps you are already familiar with the area or have found an opportunity so lucrative that buying isn’t a substantial gamble. Most of the time, however, it’s recommended that you think about renting first.

This gives you the chance to learn the area and find solutions to any complexities. If things go smoothly, you can always buy in the future. If long-term problems arise, you’ll be thankful for the flexibility your rental agreement allows.

Funding your new location.

One popular route for entrepreneurs who want to open a second location is a loan from the Small Business Administration (SBA). These financing products come with interest rates and repayment terms similar to those you’d get from the best traditional bank loans.

SBA Loans

The SBA is dedicated to helping underserved entrepreneurs, including women and minorities. If you’ve been rejected in the past and feel that you haven’t been given a fair shake, it’s definitely worth checking out the options this agency offers.

Commercial real estate loans

Commercial real estate loans can also be used for business expansion, helping you:

• Renovate an existing business location
• Construct a brand-new building
• Open new retail space
• Buy an existing warehouse
• Get out of a lease and become a property owner
• Refinance for an extension on your current payment term (to gain more immediate cash on hand)

Commercial real estate loans usually offer favorable rates and terms. For example, the rates start around 5%, and the repayment terms are about 20–25 years. The dollar amounts on these loans start around $250,000 and go all the way up to $5,000,000.

The reason these loans provide such borrower-friendly details largely comes down to collateral. The real estate involved with the loan will be used as collateral. Since lenders know their investment in your business is secured by such a tangible and valuable asset, they’ll be more generous and willing to work with you.

How to find the best loan for your real estate needs.

Don’t assume that a commercial real estate loan is the only way to fund your second business location. You have numerous financing options. The key is to review the relevant financing products and choose the one that gets you the money you need, the timeline you require, and the rate you prefer—don’t let poor financing get in the way of a lucrative second business location.

Many resources are available to help you evaluate loans and make an educated decision. One of the first places to start is a trustworthy loan calculator, which allows you to identify costs in a clear and efficient way. You also might want to talk to a financial expert who can help you identify desirable loans and watch out for red flags. 

By taking the time to choose the best location and secure the most favorable funding, you’ll be setting yourself up for a much brighter future.

Generally, there are two main levers that your business can pull to affect growth metrics: 1) customer acquisition, meaning bringing new shoppers through the door, and 2) customer retention, meaning keeping your old shoppers from exiting that door. 

Each is a necessary component of business growth, but which is more cost-effective—and which should you prioritize for your small business?

It’s long been reported that customer retention has a higher ROI. But is that actually the case? Here, I explore the evidence to dissect which is actually more cost-effective—customer retention or customer acquisition. 

Customer acquisition vs. retention: Fact-checking the numbers

“Obviously, customer acquisition,” you say, because you’re not new to business. Everyone has seen the stat that it costs 5X more to get a new customer than to keep an existing one…

Stat #1: It costs 5x more to get a new customer than to keep an existing one…

That’s a great stat! But have you ever tried to find the source? Go ahead, Google it and you’ll be clicking around dozens of articles and infographics that cite each other, but you’ll probably never find the actual report or survey where that 5X stat originated.

I’ll save you some time: The statistic goes back to a report put out by Lee Resources in 2010. The report itself, I can’t find online. And Lee Resources’ only social media presence, Twitter/X, last chirped in 2013. Their Facebook page no longer exists. 

Their oft-cited stat of customer acquisition being 5X more costly than retention may be absolutely right—but there’s no way of knowing without seeing the actual report.

Stat #2: An increase in customer retention leads to larger increases in company profits…

According to Bain & Company, “a 5% increase in customer retention increases company profits from 25% to 95%.” That’s incredible!

But, have you tried to find the source of this one? I have. Sites usually link back to this short brief by Fred Reichheld. Unfortunately, the “95% increase in profit” is not in these 3 pages. The “25% increase in profit” is there, but a) there’s no actual study/survey reported, and b) it’s only referring to financial services.

The real source of this statistic is actually a paper by Reichheld and W. Earl Sasser, Jr. titled “Zero Defections: Quality Comes to Services.”

There are a few things you should know about this paper:

1. There really is a statistic fairly close to the “95% profit” cited above: “Reducing defections by just 5% generated 85% more profits in one bank’s branch system…” So to restate, this profit increase was seen in a single bank.
2. This paper was published in 1990. Over 32 years ago and the same year Tim Berners-Lee invented something called the World Wide Web.

This stat might not be completely applicable to e-commerce—something that hadn’t been invented yet.

If anything is clear, it's that these oft-stated references should be taken with a grain of salt.

Customer retention won’t always have a higher ROI

So what was the point of this exercise in fact-checking? It isn’t so obvious that the ROI of customer retention is always more than the ROI of customer acquisition. It varies by industry, by company, and even down to the types of marketing & sales tactics that your business employs.

Customer acquisition vs. retention: What to consider

When answering the question of which is better—customer retention or acquisition— the real answer is, it depends. On many factors, in fact, including, but not limited to the following:

• Your production costs vs. operational costs
• Your product type
• Your average contract type and size
• What stage of growth your company is in
• How good your tracking data is 
• The macro-environment and industry at large

Think about it logically in the context of the timeline of a company’s growth:

Retaining customers at the start of the growth curve may indeed be more cost-efficient, but it can’t be better for the success of your nascent company. New customer acquisition is overwhelmingly important at this stage in the life cycle. 

On the opposite end, retention is key when a company has matured and has a large base of customers to keep and nurture.

It depends on the business itself.

Consideration #1: Do you offer products or services? And what of what kind?

Retention is a great idea, but what if your business largely produces products that last a lifetime? Think well-made cast iron skillets and Christmas tree stands; items that the average customer will only need to buy once or twice forever.

Maybe you offer services of some kind—whether digital or physical. Retention is going to be a much more important factor in growth.

Consideration #2: What size and kind of contracts are you working with?

Contract type is also very important to consider. Subscription businesses might favor retention more heavily, as well as companies with long sales cycles, say 3 or more months.

Consideration #3: What stage of growth is your company in? 

If you have a young business that is growing rapidly, you might favor acquisition (at least temporarily).

There's also a good chance you don't have reliable retention data yet.

Customer retention attribution is much harder to capture accurately versus acquisition. This can make it hard to proof your own ROI. Do you have reliable retention data that you can trust to base future growth decisions on?

Consideration #4: What does the macro environment look like?

You cannot ignore the state of the industry and economy when deciding whether to prioritize acquisition or retention.

If you offer a service, during a recession, your focus on retention will likely need to grow.

The spending decisions of your customer base shift largely with the macro environment. So should your growth tactic.

One last consideration…

How about one last practical thought experiment: say you want to double your business. 

Would it be easier to get every single one of your customers to double their spend, or double the size of your customer base? Suddenly, the obvious answer may not be so obvious for your business anymore.

The final verdict

It’s more important to track your business marketing & sales expenses accurately than to rely on “conventional wisdom” that might not actually be accurate to your business. 

By understanding your finances, you can calculate your own ROI on acquisition vs. retention, giving you much better data to work off on moving forward.

Perhaps the best and most important growth metric of all? Customer Lifetime Value (LTV).

In an ideal world, you’re always going to prioritize the customer (new or existing) with the highest customer lifetime value.

Customer Lifetime Value (CLV): The most important metric

I quite like this Forbes article that touched on the silliness of that 5X statistic much like I did:

Consider what Wharton Marketing Professor Peter Fader told me in an email interview: “Here’s my take on that old belief: who cares? Decisions about customer acquisition, retention and development shouldn’t be driven by cost considerations—they should be based on future value.”

Fader added, “If we could see CLV as clearly as costs, all firms would get this. But because costs are so tangible and CLVs are a mere prediction, it’s really hard to get firms to adopt this mindset.

CLV is an important statistic for your business to really get right to answer the retention vs. acquisition question.

While CLV should always be improving (which means your business is becoming more “sticky” and loyalty is increasing), it may not be big enough to sacrifice acquisition spend. Alternatively, if your CLV is great due to your churn rate being so low, then retention is already doing well and the focus should be on acquisition.

At the end of the day, no generic statistic should drive the direction of your business.

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Disclaimer:

The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. Any content provided by our authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.

The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter. 

Starting a small business is an exciting venture, filled with dreams of success and the desire for autonomy. However, the stark reality is that not all businesses survive the test of time. According to the U.S. Bureau of Labor Statistics (BLS), about 24.2% of U.S. businesses fail within their first year of operation. Understanding the factors contributing to these survival rates can help aspiring entrepreneurs prepare better and increase their chances of longevity in a competitive landscape.

Lendio looked at state and industry data to determine what factors can contribute to a business's success or failure.

Key findings

• The longer a business is in operation, the higher the failure rate. BLS data shows that approximately 24.2% of small businesses do not survive their first year. However, that number grows the longer businesses are in operation. After five years, 48% have failed, and 65.3% have failed at the 10-year mark.
• Business failure rates are higher for specific industries. Nearly 25% of businesses in the transportation and warehousing industry fail within the first year. The mining, quarrying, oil and gas extraction and information industries follow closely behind with 24% of their businesses failing in the first year. This trend may be attributed to various challenges, including fluctuating demand, rising operational costs, and intense competition within these sectors. Companies must navigate logistical complexities and maintain efficiency to survive, making it crucial for entrepreneurs in these industries to develop robust strategic plans.
• The West Coast sees both the highest and lowest business failure rates within the first year. Washington state has the highest failure rate, with 40.8% of its businesses failing in the first year. Conversely, California has the lowest failure rate within the first year, with 18.5% of its businesses failing within the first year.

The statistics at a glance.

The statistics around small business survival can be sobering. Approximately 24.2% of private sector businesses in the U.S. fail within their first year of operation. Unfortunately, the trend does not improve much over time; after five years, nearly half—48.5%—have faltered, and after a decade, about 65.1% of businesses have closed their doors for good. These figures highlight the fiercely competitive environment small businesses face and the various challenges that can impact their viability.

Geographic variations in failure rates.

Interestingly, there are notable geographical differences in business survival rates across the United States. Washington State has the highest business failure rate within the first year, with a staggering 40.8% of businesses not making it past this critical milestone. Following closely behind are the District of Columbia at 32.2% and Idaho at 30.7%.

On the contrary, California boasts the lowest business failure rate within the first year, with only 18.5% of businesses failing. Kentucky is just behind at 18.8%, and Massachusetts follows at 19.2%.

However, entrepreneurs should not let this data discourage them. A closer look at the data reveals that a significant number of locations exhibit below-average failure rates, indicating pockets of resilience among small businesses. Specifically, 32 out of the 51 locations examined for this piece boast lower-than-average one-year failure rates, suggesting that many entrepreneurs in these areas benefit from supportive ecosystems.

23 locations maintain below-average five-year failure rates, showcasing their ability to weather initial challenges and sustain growth over time.

Impressively, 24 of the locations also enjoy below-average ten-year failure rates, highlighting long-term viability and the significance of local conditions in nurturing successful business ventures.

The environment in which a business operates can significantly influence its chances of survival. In fact, according to a study by Lendio, environmental factors such as access to funding, tax incentives, and a flourishing local economy can significantly enhance business's chances of survival and success in different states. By selecting a location that aligns with their business goals and provides the necessary resources, aspiring entrepreneurs can create a stronger foundation for long-term viability and growth.

Industry-specific challenges.

Beyond geographical factors, the industry in which a business operates also plays a crucial role in its survival.

Industries with lower survival rates

The transportation and warehousing industry is particularly challenging, with a failure rate of 24.8% within the first year. This figure is closely followed by the mining, quarrying, and oil and gas extraction industry at 24.4% and the information industry at 24.1%. These industries often face unique obstacles, from fluctuating demand to regulatory pressures, making it essential for entrepreneurs to understand the intricacies of their chosen field.

Industries with higher survival rates

Conversely, certain industries demonstrate significantly higher survival rates within their first year of operation. For instance, businesses in the retail trade sector have a low failure rate of just 12.9% in their first year. Similarly, the accommodation and food services industry shows a solid survival rate, with just 14.2% of businesses failing within their first year. The agriculture, forestry, fishing, and hunting industry also presents encouraging statistics with a failure rate of just 15.1%. These figures suggest that businesses in these industries may benefit from more stable demand or fewer operational hurdles, contributing to their advanced longevity.

When selecting an industry for a new business venture, it’s essential to consider not only the initial survival rates but also the long-term viability of that sector. While industries like retail and accommodation may show promising survival rates in their first year, it’s important to assess trends over a longer timeframe. For instance, the food industry, despite often having a solid start, can face challenges related to saturation, changing consumer preferences, and increasing competition, which might impact longevity. A comprehensive assessment of both short-term and long-term survival statistics will help entrepreneurs make informed decisions, ensuring they choose a path that not only offers immediate success but also sustainable growth in the years to come.

Recent trends and influencing factors.

It's worth noting that the 1-year business failure rate has jumped by at least two percentage points for two consecutive years. This increase can be attributed to several factors, including various economic pressures. Businesses should be adaptable and resilient to help stay afloat during difficult times.

The business failure rates for the past three years are as follows:

• March 2020 - March 2021: 18.4% failure rate
• March 2021 - March 2022: 20.8% failure rate
• March 2022 - March 2023: 24.2% failure rate

Economic pressures can significantly influence a small business's chance of survival, affecting everything from cash flow to consumer spending. During periods of inflation, for instance, the rising costs of materials and services can squeeze profit margins, ultimately making it harder for a business to stay afloat. When expenses increase, many small businesses are forced to make tough decisions, whether that means raising prices, cutting costs, or even reducing staff. These changes can directly impact customer satisfaction and loyalty, leading to a decline in sales.

Additionally, economic downturns can lead to reduced consumer confidence. When individuals are uncertain about their financial future, they are less likely to spend, which means businesses may experience a dip in sales. This is particularly challenging for startups or small businesses that rely heavily on consistent sales to sustain operations.

Additionally, access to financing becomes more difficult during economic struggles, as lenders tighten their criteria for loans. As a result, small businesses may find themselves grappling with insufficient working capital, making it a challenge to cover day-to-day operational costs or invest in growth opportunities. Understanding these economic dynamics is crucial for entrepreneurs aiming to enhance their resilience and sustainability in an unpredictable market.

How businesses can build a strong foundation for success.

Given these statistics, aspiring entrepreneurs must recognize the importance of building a strong foundation for their businesses. Here are some strategies that can help increase survival rates:

1. Market research. Understanding the market landscape, customer needs, and industry trends is crucial for business planning. Thorough market research can help entrepreneurs mitigate risks by ensuring they address the real demands that businesses within their respective industries face.
2. Financial planning. Sound financial practices are essential. Businesses should maintain a clear budget, monitor cash flow, and prepare for unforeseen expenses to avoid financial pitfalls.
3. Flexible business models. Being adaptable and willing to pivot in response to market changes can make a significant difference in a business's longevity. This might involve diversifying service offerings or exploring new customer segments.
4. Networking and support. Joining local business networks and seeking mentorship can provide invaluable resources and support. Learning from others' experiences can offer insights into avoiding common pitfalls.
5. Staying informed. Keeping on top of economic trends, consumer preferences, and industry developments can help businesses remain competitive. This proactive approach can foster innovation and allow businesses to adapt to changes more effectively.

Conclusion

While the statistics on small business survival rates may appear daunting, they also serve as a call to action for entrepreneurs. By understanding the factors that contribute to business failure and implementing strategic practices to counter them, aspiring business owners can improve their chances of success. The road may be rocky, but with careful planning, resilience, and adaptability, the dream of owning a thriving business can indeed become a reality.

Small businesses play a vital role in the economy, accounting for a significant portion of job creation and economic growth. However, starting and running a small business can be challenging, with numerous factors impacting success. By understanding the latest trends and insights on small business statistics, entrepreneurs and business owners can gain valuable insights into the current state of the small business landscape and develop effective strategies to thrive. 

In this blog post, we will explore key statistics on small businesses, including sentiment, funding sources, and common challenges.

Growth and revenue

Small business growth and revenue statistics.

• There are 33.3 million small businesses in the United States.
• 5.5 million new business applications were filed in 2023 continuing a surge in small business growth since the pandemic. (U.S. Census Bureau)
• Small businesses make up 99% of all U.S. companies.
• Small businesses employ 61.6 million people and nearly 46% of all private-sector workers.
• Small businesses saw a gross revenue of $13.3 trillion annually.
• The number of businesses owned by Black, Hispanic, and Asian Americans has increased by more than 50% from 2007 to 2020.
• The most common industries to start a business include retail, professional services, and construction.

Small business owners

Who owns small businesses?

• 63% of employer firms are owned by men.
• In total, women own 13.8 million businesses employing 10 million workers and generating $3.9 trillion in revenue across the U.S. 
• There are an estimated 3.7 million Black-owned businesses in the United States and an estimated 161,422 Black-owned businesses with at least one employee in the United States.
• Veterans own 8.1% of businesses. (SBA)
  

Small business sentiment

Small business owners’ sentiment statistics.

• 49% of small business owners believe it’s somewhat or much harder to achieve the dream of owning a small business than in the past. 33% of SMB owners believe it is somewhat or much easier. 19% say it’s about the same.
• 89% of small business owners believe it’s possible to attain the goal of owning your own business.
• The Mid-Atlantic region (New York, New Jersey, and Pennsylvania) had the most positive sentiment toward being able to start a business, with 96% of respondents believing it’s possible.
• The East South Central region (Kentucky, Tennessee, Alabama, and Mississippi) had the most negative sentiment, with 30% of respondents stating they didn’t believe it was possible to obtain the goal of owning their own business. 

Source: Lendio

Small business challenges

Small business owners’ challenges statistics.

• 41% of small business owners state their number one challenge is related to the economy and inflation, with another 14% struggling most with financial concerns.
• Hiring remains the No. 1 challenge for 11% of small business owners, while COVID recovery vexes 4.5% of business owners and supply chain issues 3.4% of SMB owners.
• 56% of small businesses state that large corporations have a negative impact on growth opportunities for their businesses.

• 66% of small business owners state having a financial safety net would have had the most impact on their ability to start a business, followed by access to capital at 53%. 
• 24.2% of new businesses fail within the first year. (BLS)
• Of the respondents, 52% state that living in an area with lower business costs and a lower cost of living would be helpful. 44% state lower taxes would have a positive impact. 
• 33% state more customers and resources, 26% state less cultural bias, and 32% state access to educational resources and guidance would have had an impact on their ability to start a business.

Source: Lendio

Small business funding

Small business funding statistics.

• 54% of SMB owners started their business with personal funds, with another 12% relying on friends and family. 14% used a bank loan, 3% an online lender, 3% venture capital, 3% crowdfunding, and 4% credit cards.
• 79% of SMB owners needed less than $100,000 to start their business, while 43% needed less than $10,000.
• The average loan amount for a small business owner is $47,000.*
• A small business has a median of five employees when it is first funded by an outside lender.*
• A small business has been in business for about three years (a median of 40 months) when it is first funded by an outside lender.*
• Minorities received 32% of SBA 7(a) loans and 30% of SBA 504 loans in 2023.

*Based on internal Lendio data of 300,000+ loans funded since 2013.

Source: Lendio

Generational differences

Small business owner generational differences statistics.

• Those under the age of 45 report needing more money to start their business, with 23% needing $100K to $250K. In contrast, only 10% of those aged 45+ needed that amount.
• While both generations rely heavily on personal funds to start their businesses, those under the age of 45 have started to turn to alternative sources, such as crowdfunding (6%) and online lenders (5%).

• 46% of younger business owners (18-44) believe owning a small business is somewhat or much easier to achieve. 
• 58% of older business owners (45+) believe owning a small business is somewhat or much harder to achieve.
• While a large majority (71%) of SMB owners aged 18-44 believe large corporations have a negative impact on growth opportunities for their business, 57% of those 45+ disagree, stating large corporations don’t have a negative impact on their business.
• While the generations agree that a financial safety net, access to capital, and low costs are most critical to success, those 44 and younger place greater importance on access to educational resources and see cultural bias as a larger inhibitor. 
• Both generations agree that the freedom to live how you want is the most important component of the American dream. Perhaps unsurprisingly, those 45+ place greater importance on retirement (46%), while those under 45 place more importance on becoming wealthy (36%).

Source: Lendio