The average small business loan amount for U.S. small businesses was $71,072 in 2020. The average loan amount varied widely based upon the type of business borrower, the type of bank or lender, and the terms of the loan, with averages ranging from $5,000 to $2.2 million.
This loan data was provided by the Federal Reserve’s Small Business Loan Survey, which applies to businesses with up to $5 million in annual sales. Among the 105 lenders surveyed, there were a total of 1.04 million loans outstanding, and a total of $74.2 billion was lent by these financial institutions to small businesses.
Average Small Business Loan Balances by Loan Type
The interest rate on small business loans can be either fixed or variable. AdvisorSmith found that the average loan balance for fixed-rate loans was significantly lower than that for fixed-rate loans for small business term loans. Additionally, the majority of term loans were fixed-rate loans.
| Loan Type | Average Loan Balance | # of Loans | % of Loans |
|---|---|---|---|
| Fixed-Rate Loans | $66,917 | 992,060 | 95% |
| Variable-Rate Loans | $150,647 | 51,791 | 5% |
Average Small Business Loan Amounts: Alternative Lenders
In addition to traditional banks and financial institutions, small business owners also have new options for small business loans. A newly popular option for small business loans are alternative lenders. These lenders, who typically operate online, offer loans to small businesses with more flexible terms and in some cases, quicker underwriting compared with traditional lenders. In the following table, we list several leading alternative lenders and the range of small business loan amounts available at these lenders.
| Lender Name | Average Loan Amount |
|---|---|
| Bluevine | $5,000 - $250,000 |
| Credibly | $5,000 - $400,000 |
| OnDeck | $5,000 - $250,000 |
| Lendio | $1,000 - $500,000 |
| Kabbage | $5,000 - $250,000 |
| Funding Circle | $5,000 - $500,000 |
| Paypal | $5,000 - $500,000 |
| LendingClub | $5,000 - $500,000 |
| Fundbox | $5,000 - $150,000 |
Alternative lenders provide more flexibility for small business owners by offering loans with more relaxed underwriting, faster funding, and flexible loan amounts. Typically, these lenders charge higher interest rates compared with traditional bank loans, although as the space has become more competitive, interest rates and fees have come down.
These lenders can provide loans to businesses that may not qualify for traditional bank lending. Additionally, some alternative lenders make use of alternative sources of data for underwriting, such as examining a business’ credit card sales or taking into account the collection of accounts receivable.
Average SBA Loan Amounts
The U.S. Small Business Administration (SBA) provides loan guarantees for loans to small businesses issued through banks. The definition of small business used by the SBA differs from the definition used by the Federal Reserve.
Businesses with significantly more revenue than $5 million are still considered small businesses by the SBA. Average loan amounts for SBA-guaranteed loans are typically higher than those for Federal Reserve-defined small businesses.
The average loan amount for loans guaranteed by the SBA 7(a) loan program was $567,599 in 2020. The SBA guaranteed 73.5% of the loan amount on average, or $417,567. SBA 7(a) loans have a maximum loan amount of $5 million, and the SBA’s maximum guarantee is $3.75 million, which is 75% of the maximum loan amount (for loans above $150,000).
The following table shows the top 25 lenders of SBA 7(a) loans by loan value in 2020. It also shows the average loan value for each lender, along with the number of SBA guaranteed loans issued by the bank.
| Rank | Lender | Average Loan Value | Total Loan Value | Number of Loans |
|---|---|---|---|---|
| 1 | Live Oak Banking Company | $1,413,964 | $1,521,424,750 | 1,076 |
| 2 | Byline Bank | $1,299,153 | $627,490,700 | 483 |
| 3 | Celtic Bank Corporation | $1,176,580 | $560,052,300 | 476 |
| 4 | The Huntington National Bank | $162,986 | $522,857,855 | 3,208 |
| 5 | Wells Fargo Bank, National Association | $330,193 | $517,742,800 | 1,568 |
| 6 | Harvest Small Business Finance, LLC | $1,253,474 | $373,535,300 | 298 |
| 7 | Enterprise Bank & Trust | $1,117,844 | $340,942,524 | 305 |
| 8 | KeyBank National Association | $586,006 | $308,239,000 | 526 |
| 9 | U.S. Bank, National Association | $126,528 | $304,299,400 | 2,405 |
| 10 | Newtek Small Business Finance, Inc. | $705,004 | $286,936,800 | 407 |
| 11 | United Midwest Savings Bank, National Association | $316,491 | $266,801,900 | 843 |
| 12 | MUFG Union Bank, National Association | $1,478,630 | $266,153,400 | 180 |
| 13 | Bank of the West | $751,157 | $257,647,000 | 343 |
| 14 | Readycap Lending, LLC | $1,114,295 | $236,230,600 | 212 |
| 15 | TD Bank, National Association | $194,573 | $219,867,766 | 1,130 |
| 16 | Bank of George | $2,196,503 | $210,864,300 | 96 |
| 17 | Commonwealth Business Bank | $1,143,757 | $209,307,500 | 183 |
| 18 | Berkshire Bank | $979,796 | $197,918,800 | 202 |
| 19 | Umpqua Bank | $1,112,992 | $190,321,700 | 171 |
| 20 | Metro City Bank | $1,874,784 | $174,354,900 | 93 |
| 21 | Pinnacle Bank | $1,210,760 | $171,927,900 | 142 |
| 22 | Wallis Bank | $1,634,302 | $168,333,100 | 103 |
| 23 | Citizens Bank | $746,406 | $162,716,500 | 218 |
| 24 | Open Bank | $1,559,593 | $160,638,100 | 103 |
| 25 | Regions Bank | $1,371,619 | $160,479,448 | 117 |
Expert Perspective
Hitendra Chaturvedi
Professor of Practice, Supply Chain Management
W. P. Carey School of Business, Arizona State University
What are major trends occurring in the small business lending market?
The biggest trend happening in small business lending is the arrival of technology and data-driven business models, or fintech companies and COVID-19 is accelerating this. The sector that was hit the hardest was the small business, and the traditional banks failed to help them (one just needs to look at the troubled PPP rollout), as they are too big to be nimble and fintech stepped in to capitalize on this opportunity.
Research and Markets 2020 predict this sector growing at over 23.5% CAGR between 2021 and 2025. Even we know companies like PayPal and Square have already gotten approval to join PPP and are using the data they already have to turn the traditional small business lending model on its head by giving approvals that are much faster than a traditional bank (in some cases in as little as three days).
Big data, artificial intelligence, and blockchain are key technologies driving this sector, and banks and credit unions are tuning in fast as data has shown that over 60% of credit unions and close to 50% of banks have reported keen interest in forging partnerships with these fintechs. According to a PwC report on fintech released in 2020, they predict that 28% of traditional banking and payment services will be at risk of disruption due to the new business models of the fintechs.
With vaccines becoming more widespread and the economy recovering from the pandemic, what effects do you see on small business lending?
Small and medium business has been in the past and will be the growth engine of this country post-COVID-19. We will see fintech/alternate lending models grow rapidly and traditional banks scrambling to either partner, invest in, or acquire some of these alternate lenders.
Technology like blockchain and AI will bring in new players that will challenge the hegemony of the traditional banks, and this competition will make it better for small businesses with various options. Post-pandemic, this could be a birth of a new small business landscape as we know it—and all for the good.
The only thing to watch out for is if the traditional banks gobble up some of these promising fintechs that may bring us back to square one—and we need to watch out for that very carefully.
Methodology
AdvisorSmith examined data published by the Federal Reserve on loans to small businesses as reported in the Small Business Lending Survey. These loans included commercial and industrial loans to U.S. nonfarm small businesses as of the end of 2020. The Federal Reserve defines U.S. nonfarm small businesses as U.S. businesses with under $5 million in annual sales. In the most recent quarter, this survey included 105 banks and financial institutions.
The loans reported in this survey include term loans, lines of credit, overnight loans, construction loans not secured by real estate, and credit card loans. Loans excluded from this dataset include loans not in U.S. currency, loans made to non-U.S. addresses, real estate loans, intercompany loans, loans to financial institutions, overdrafts, and loans for trading purposes.
To determine the average small business loan balance, we calculated the average loan balance for term loans from the survey by taking the total loan balance divided by the number of outstanding loans. By selecting term loans only, we excluded business credit cards and business lines of credit from the average.
Sources
- Federal Reserve Bank of Kansas City, Small Business Lending Survey
- Small Business Administration, 2010 – Present SBA 7(a) Loan Data