Study Shows Small Business Loan Approval Rates by Industry
Ever since the economy began rebounding from the Great Recession, we’ve seen small business loan approval rates at big banks continue to rise. On top of that numerous alternatives have emerged, including online and peer to peer lenders. However a major factor that could inform whether or not you’re approved for a loan is what type of small business you’re opening or currently operating. That’s the focus of a recent Biz2Credit report that looked at how various verticals fared when it came to small business loans.
According to Biz2Credit, those in the Restaurant and Accommodation industry had the highest loan approval rates in 2018. While that vertical was the only one to top the 50% threshold, Health Care (37%), Retail Trade (36%), Information Technology (35%), and Professional Services (31%) were all in above 30% approval rates. Finally those at the bottom of the list were part of the Personal Services sector — salons, gym, dry cleaners, landscaping, etc. — which were found to only have a 16% loan approval rate.
Diving deeper into loans for these verticals, it was discovered that Information Technology companies see the highest average funding amount, reaching $102,029 nationally. However IT firms in the Garden State saw much higher averages ($251,250) to make New Jersey the top funding state for this industry. Meanwhile retailers in New York bested the national average $121,867 to $73,564 and Personal Service companies in Texas more than doubled that national average of $52,989 to hit $116,154. The Empire State was also good to Restaurant and Accommodations while Massachusetts led the way for Professional Services funding with California boasting the highest average funding for Healthcare operations.
Explaining the study’s findings, Biz2Credit CEO Rohit Arora noted, “Restaurants and other food and accommodation businesses are inherently more risky than other types of businesses. However, with a strong lending atmosphere, the approval rates have been surprisingly high.” Arora added, “One reason for this result is that many food businesses do not qualify for traditional bank loans, but they are able to get funding via non-bank lenders, who charge higher rates but are willing to provide funding.”
As Arora points out, there are pros and cons to many small business funding options. Furthermore the nature of your business may also play a role in determining which outlet is best for you. Ultimately, while some industries may have an easier time than others securing the financing they need, the good news is that small business lending is still booming as the economy continues to grow.