Average Small Business Loan Amount: Outlined And Defined
8 Min. Read
Table of Contents
- Average Business Loan Amount by Lender
- Average Online Business Loan by Loan Type
- Applying the Data
According to the Federal Reserve, the average business loan amounts to $633,000. But what does this number tell you?
The world of financing is varied. How much you qualify for will depend on your business profile, need, the type of funding you choose and the lender you decide to work with.
So instead of asking what the average small business loan amount is, it’s better to dive a bit deeper.
To help you predict the amount of financing you might nab as a small business owner, we’ve compiled the average small business loan amounts based on lender and loan type.
Average Business Loan Amount by Lender
Learning what lenders look for is a good starting point in deciding how to get a small business loan.
Specific lenders have different resources and goals for their loan programs. Your lender might decline your application simply because you’re asking for too much or too little.
Large National Banks: $593,000
Banks are the gold standard in business financing. They offer the best rates, long repayment terms and high average business loan amounts. In fact, the average business loan issued by large banks is $593,000.
Large banks generally shy away from smaller commitments as lower principals accrue less interest. Banks are also risk-averse, preferring to work with large established corporations over smaller ones.
For this reason, they’re not the right fit for every business owner. If you’re looking for modest loan amounts or your credit profile doesn’t meet a bank’s strict requirements, you’ll need to look elsewhere.
Small National/ Regional Banks: $146,000
Smaller banks (like regional banks and credit unions) tend to have less money by nature. This makes it difficult for them to offer the multi-million dollar loans that large national banks can.
The average amount lent is $146,000—almost $450,000 less than larger banks. The risk of debt charge off on loans of such size is too significant. In turn, regional banks are a good source for small business owners looking to fund less capital-intensive projects.
Despite the lower dollar amounts, qualification requirements for loans issued by regional banks and credit unions are strict. Business owners working to improve their financial profile may have to consider alternative routes to financing.
Small Business Administration: $107,000
SBA loan programs are an initiative by the federal government to offer assistance to small businesses in need of funding.
If your small business isn’t able to qualify for funding through traditional financial institutions, the SBA will “guarantee” a portion of the loan or offer complementary financing through one of their non-profit partners. Because of this guarantee, banks assume less risk and are more apt to work with small business owners. The two most popular SBA programs are the 504/CDC and SBA 7(a).
Unlike bank loans that vary and are capped at the discretion of the lender, the SBA sets maximum loan amounts. The 504 program has a maximum of $5 million for the CDC/backed portion of the loan, while the bank can negotiate any amount over 50 percent of the total loan amount.
The 7(a) program is comprised of multiple options, with maximums ranging from $350,000 for Express loans to $5 million for a general 7(a) loan.
Both programs are offered at participating banks, averaging $107,000.
SBA Loans From Large Banks: $59,000
You might realize that $59,000 is lower than the typical business loan amount for all SBA loans and wonder why considering large banks generally service larger loans. Larger banks generally don’t concern themselves with SBA loans.
Of the inventory of loans they provide each year, only 0.1 percent are backed by the SBA.
Small Banks: $165,000
Smaller banks, on the other hand, don’t usually have the opportunity to take a risk on those multi-million dollar loans. With the government guaranteeing a portion of them, however, it lessens their risk and makes it worth offering more high-priced approvals, averaging over $165,000.
They also provide almost ten times more SBA-backed loans per year than large banks, despite servicing thousands less overall. If you’re looking for an SBA loan, start your search for a lender at a regional bank.
We receive a lot of questions from veterans about the options they have to fund their business. Luckily, the SBA has increased interest in helping veteran-owned businesses get the working capital they need to succeed. While there are no veteran-only small business loan options out there, the government will waive (or partially waive) some of the fees on their financing products to help lower costs. The SBA Veterans Advantage program offers discounted costs on 7(a) loans and their Express program, as well as a Military Reservist Economic Injury Disaster Loan (MREIDL), which protects businesses whose owner is called up for active duty. The maximum VA business loan amount is tied to the program you apply to. Therefore, the averaged listed above still apply.
A Note on Veterans Advantage Loans
We receive a lot of questions from veterans about the options they have to fund their business. Luckily, the SBA has increased interest in helping veteran-owned businesses get the working capital they need to succeed. While there are no veteran-only small business loan options out there, the government will waive (or partially waive) some of the fees on their financing products to help lower costs.
The SBA Veterans Advantage program offers discounted costs on 7(a) loans and their Express program, as well as a Military Reservist Economic Injury Disaster Loan (MREIDL), which protects businesses whose owner is called up for active duty.
The maximum VA business loan amount is tied to the program you apply to. Therefore, the averaged listed above still apply.
Alternative Lenders: $80,000
Alternative lenders look at your business’s overall financial health to assess your fundability.
This means they’re more likely to work with younger, smaller businesses. As a result, the average business loan amount offered through online alternative lenders is typically lower, around $80,000.
Qualified borrowers with high annual revenues can still receive seven-figure loans, but the interest rates and repayment structure will be different from what large banks offer.
Average Online Business Loan by Loan Type
Up until now, we’ve talked about both long – and short-term loans offered by banks and alternative lenders. There are, however, other options you can use to fund your small business.
The following are alternatives to term loans and are generally offered by online lenders. They may not share the same low interest rates offered by banks or the SBA, but they have flexible terms and are options for businesses with bad credit.
Business Line of Credit: $22,000
These work like business credit cards, letting you withdraw and use funding as needed. You pay back what you borrow, and then take out additional funds as you need to.
Banks do offer higher lines of credit to qualified borrowers, but online lenders approve businesses unable to qualify for those high limits, albeit at a considerably lower amount. The average business line of credit offered by alternative lenders, like Fast Capital 360’s partners, is around $22,000.
Merchant Cash Advance: $32,000
Not technically a loan but an advance, merchant cash advances (or MCAs) are a favorite choice for businesses with a limited credit history or a bad credit score.
MCA lenders provide you with working capital that is repaid with a percentage of your future sales. Payments are taken out from credit card transactions or ACH draws until you have paid in full.
These are great short-term lending options for businesses looking for an infusion of working capital. The average merchant cash advance amount is $32,000, providing everything you need to get through a dry spell.
Equipment Financing: Up to 100-Percent of Value
If you’re in the market for new equipment, it’s not the average but the maximum business loan amount you should consider. Instead of basing the total amount off of what you can qualify for, equipment financing considers your fundability alongside the value of what you want to purchase.
For example, a qualified borrower applying for $50,000 in commercial truck financing would be given a loan for the full $50,000.
Depending on the equipment’s longevity, however, you could be required to submit a down payment. Check with your lender during the application process to learn what you could be on the hook for up front.
Invoice Financing: Up to 80-Percent of Receivables
Like equipment financing, the average accounts receivable (or invoice financing) case won’t have much bearing on your potential funding amount.
With this financing product, lenders give you up to 80-percent of the outstanding invoices you wish to finance. Instead of paying them yourself, lenders are paid when your customers make good on your unpaid invoices.
Doing so shifts the burden onto your customers to pay and, if they’re a business the lender believes will pay up, your credit won’t matter nearly as much as it does for bank loans.
The amount of funding you get, then, will correlate with the value of what’s already owed to you.
Think about it like getting an advance when you need working capital and don’t have time to wait for your customers to pay up.
Applying the Data
Now that you have an idea of what amounts are considered average for a small business loan, it’s time to assess your own situation.
If you think one of the alternative loans we mentioned would be a better fit, one of our expert business advisors will guide you through how the process works and match you with the perfect lender.
If you’re wondering how different rates and repayment terms are affected by your potential business loan amount, our calculators can help you get a better idea of what’s in store for you as you apply.