Average Loan Amounts For Small Businesses
Important Notice: For SBA Paycheck Protection Loans consider Fundera
|Loan Amounts||$5,000 to $500,000|
|APR Range||Term Loans: 7% – 30%|
Startup Loans: 7.9% – 19.9%
|Repayment Terms||Term Loans: Up to 10 Years|
SBA Loans: Up to 25 Years
|Time to Funding||Varies|
|Click “Check Rates” to apply to Fundera|
Businesses run on one thing – money. Money is the blood that pumps through a business’s veins, helping it to live and grow. So, it’s understandable that most of us reach a time in our businesses where we need an influx of money to help us reach that next big goal, such as opening a second location, bringing on new team members, or renovating our place of business.
Of course, you’ll likely have a ballpark figure in mind for how much all this is going to cost, but what may be available to you and what are other businesses getting? Let’s take a closer look.
What Is The Average Business Loan Amount?
Of course, business loans vary significantly depending on the size of the business and the type of loan they get; however the most recent Federal Reserve report saw an average of $663,000 for lending from banks.
Of course, this figure doesn’t include the thousands of small business loans that were distributed through alternative lenders.
In 2017, large banks lent an average of $564,000, though this figure is far larger than most small businesses would qualify for. Why is that? Because a “small” business is defined as any business with a revenue of up to $7 Million, or 500 employees. If you’re a young small business, those figures are likely out of reach.
Small banks loaned a much more attainable average amount, at $184,000. Of course, while they’ll still have stringent qualifications for their loans, they’ll be catering to everyday businesses with good credit scores.
Alternative lenders are more likely to supply smaller amounts to young businesses and those with less than perfect credit. This includes SBA loans, but also short- and medium-term loans, and a range of other products. The average amount or small business loans from alternative lenders in 2017 was $80,000.
We’ll take a look at the average loan amounts for the different types of business loans below.
What Are Average SBA Loan Amounts?
SBA loans are incredibly popular because they are part-guaranteed by the government. These loans are best for those who need a larger sum but aren’t in a rush to get their funding, as they often take weeks or even months to receive. They come as a lump sum and are paid back over 5-30 years, depending on the circumstances of the loan. The most recent figure for how much small businesses borrowed through SBA loans was $107,000 in 2017.
How Much Can You Borrow with SBA Loans?
But what about the different types of SBA loans? While the overall average lending amount issued by banks was $107,000, that doesn’t look into the different types of SBA loans or where they come from.
There are two different types most consider, SBA micro-loans, and the SBA 7(a).
The maximum amount you can borrow with an SBA microloan is $50,000, but the average loan size in 2017 was $13,884. Microloans are designed to be small, and are best for startups and very small businesses looking for an extra boost in capital to get their business off the ground or to take the next step.
The maximum amount you can borrow with the SBA 7(a) loan is $5 Million, though you won’t find many lenders that will offer this maximum. This loan is best if you’re looking to buy an additional business (not a new one), buy a new property, or similar.
The lender we recommend for SBA loans, SmartBiz, offers loan amounts of $30,000 to $350,000, so that may give you a better idea of what is possible for you.
|Loan Amount:||$30,000 – $350,000|
|APR Range:||9.7% – 11.04%|
|Time To Fund:||Typically take several weeks to fund, but can fund as quickly as within seven days.|
|Loan Term:||Maximum loan term is 10 years.|
|How To Qualify:||675+ Personal credit score|
$50,000+ Annual revenue
|Great Option For:||Borrowers with good credit|
Funding real estate purchases
|Credit Check?||Soft credit check and hard pull|
|Co-Applicants Accepted?||No cosigners|
|Direct Pay-Off To Creditors?||No|
|Click “Check Rates” to apply to SmartBiz|
» MORE: SmartBiz SBA Loan Review
Average Term Loan Amount for Small Businesses
Term loan amounts again vary, depending on whether they’re short-term (under 18 months) or medium-term (1-5 years). Some term loans can also be taken out for longer periods of time, such as up to 7-10 years.
These loans are best if you’re looking for a traditional loan and just need funding fast. Most term lenders fund you in 1 day – 2 weeks.
You need to be cautious when looking for a short-term loan, but good legitimate lenders are a great way to get the fast funding you need to make an additional purchase. The average amount borrowed for short-term loans is $20,000.
For medium term, you can typically borrow up to $500,000, depending on your personal circumstances. The average loan amount for medium term loans is $110,000.
One of the term lenders we recommend, Funding Circle, has an average loan amount for medium-term loans of $135,000. And for short-term loans, OnDeck, another lender we believe in, has an average loan amount of $52,000.
What Is the Average Line of Credit Amount For Small Businesses?
A line of credit is often the best choice for businesses that need flexible funding, and don’t necessarily want to get a large lump-sum loan. Lines of credit work much like a credit card; in that you agree an amount with your lender and that’s the maximum you can borrow. Then, you only pay interest on the money you have borrowed. Once you pay it back, you can borrow it again.
Line of credit amounts vary significantly, but the average amount is $22,000. One of our preferred lenders, OnDeck, has an average line of credit amount of $19,000, while BlueVine averages $25,000 – $30,000.
What About Other Small Business Loans?
There are a few other types of small business loan:
Equipment loans are tied to the equipment you buy, and are secured. These loans will vary depending on the equipment you need, but if you’re looking to borrow money to buy equipment that is expensive, you will likely be able to borrow more than if you simply applied for a term loan do to the same.
Invoice financing is where you essentially “sell” your invoices to another company and get 80% (or more) of it there and then. They then collect the payment from the client and pay you any remaining amount, minus their fees.
Merchant cash advances are similar. You borrow an amount from the company who processes your credit and debit card payments and they take the money back automatically as your transactions come in.
All three of these methods depend a lot on your business, so there isn’t any public average data.
How Do I Decide Which Small Business Loan is Right for My Business?
The best way to decide what you need is to look at why you need the loan, your own circumstances (such as credit rating, revenue, age of business, etc.), and how much you’re looking to borrow, and match that with the loan type that best suits you.
This may take some time and research (the resources here on PrimeRates will help you!), and when you’re ready to move forward, make sure you compare loans, just as you would for a personal loan.
We can do just that for you – all you need to do is fill in our form, we’ll compare loans, and we’ll show you the best. Then, you can move forward with your selected lender knowing you’re getting the best deal for your business.