When it comes to small business loans, the approval rate is higher for institutional lenders than any other type of lender, at 66%. Cash advances for merchants have the highest approval rate of all types of small business funding, at 85%. Small business banks have seen a half-percent increase in approval rates from the previous year, and this year it went from 18.9% in June to 19.1% in July. Non-bank lenders also boast higher approval rates, and applications are processed quickly so you can cover unexpected bills on short notice.
Shopify's small business loan calculator can give you an idea of what it will cost to apply for a loan. The Wall Street Journal reported that new businesses are emerging at a record pace. The construction and renovation industry receives the highest proportion of small business loans, at 15%. Credit unions received 9% of loan applications, and 3% went to community development financial institutions (CDFIs).
There are plenty of small business loan options available, each with its own advantages and disadvantages and different repayment terms. African-Americans and other minorities struggle with approval rates, as only 47% of their loan applications are approved. According to a Federal Reserve report, 95% of companies said the pandemic affected their operations. Smaller banks, especially community and regional institutions, are partnering with FinTechs to digitize their small business loan application process.
Equipment financing is a type of business loan specifically designed to help you buy commercial refrigerators, tractors, or computer equipment. The Federal Reserve reported that more than half of companies that applied for funding did so to cover operating expenses such as rent or mortgage payments and salaries. The United States Small Business Administration (SBA) offers government-backed loans through several lenders including banks and credit unions. Studies have shown that black-owned businesses are twice as likely to receive loan refusals, with less than 47% of approved funding requests.
That figure includes 20% of small businesses that secured funding through loans and 28% that didn't have enough capital without loans.