Average Small Business Loans
Owning a business is an exciting adventure.
You get to be the boss. You get to make major decisions. You create something you can be proud of for use to come.
For some people, their business is their life.
When starting a business, or giving it a boost, you need money. Most small businesses turn to loans to keep the business going.
Almost any business owner can apply and receive an average small business loan. There are many types of small business loans from many different types of lending institutions.
Are you planning to take out an SBA loan for your business? Before you do so, learn the different loan amounts and types you can choose from to make a smart decision for your business.
In simple terms, a small business loan is a set amount of money that a business owner or co-owners borrow from a lender. Both parties sign a pre-set agreement specifying the amount lent and the interest that you'll pay back over a period of time.
From there, you can find many different types of business loans and loan agreements.
A loan many business owners desire is an SBA loan. The U.S. Small Business Administration works with lending providers to help offer loans for businesses. They don’t directly lend the money but work with banks, credit unions, and other lenders to offer safe business loans.
The SBA protects most lenders by covering up to 85% of a loan in case the borrower defaults. Lenders don’t need to worry about losing large sums of money. Business owners have the opportunity to receive loans at lower interest rates.
Receiving an SBA loan depends on your eligibility, such as business type, credit score, and business equity.
In 2018, the average small business loan amount was $663,000. That’s for all business loans regardless of loan type.
Depending on the amount you need for your business and what your lender offers can range from $13,000 to over $1.2 million.
However, different types of business loans have different average amounts. Here’s a breakdown of the different types of business loans out there and their average lending amounts.
As mentioned above, SBA loans help protect both the loan lender and the business owner. These loans are great for those who need money for larger business endeavors as they come in a large lump sum.
You can find different loan programs that work with SBA loans, such as the micro-loan and the popular 7(a) loan program
The average business loan amount through small business loans backed by the SBA in 2017 was around $107,000.
Short-term business loans are similar to bank loans but an alternative, non-bank lender lends them out. This type of loan is easier to receive than long-term or medium-term loans.
If you have a small idea you want to try with your business, a short-term loan is the smartest option. As the name suggests, they’re generally smaller amounts that you can repay in a shorter amount of time.
The average amount for a short-term business loan is around $20,000.
Similar to short-term loans, this type of loan comes from alternative lenders. They’re larger sums of money you can use over an extended amount of time, generally between 2-5 years.
An advantage of this loan is it has a set repayment timeline with regular payments. A business owner can take up to $500,000 with a medium-term loan. Your credit, revenue, and other factors will determine your eligibility for this loan.
The average loan amount is around $110,000.
This type of small business loan offers more flexibility than regular business loans. You can borrow up to a certain amount of money, but only pay interest on what you borrow. This flexibility allows you to use and repay amounts when you can and only pay interest on what you use.
Non-bank lenders offer business lines of credit. They are more accessible than traditional loans and are a great solution for those who need flexibility with a short-term loan.
The average business line of credit amount is $22,000.
Financing is another way to get funding for your business.
With Equipment financing, you receive loans designed to help you pay for expensive business equipment. You can receive a loan that covers up to 100% of the equipment’s cost that you’ll pay back with interest over a set amount of time.
Invoice financing is similar but helps pay for any outstanding business invoices. You can receive a loan of up to 85% of the invoice cost.
Since these loan types depend on the value of the equipment or invoices, there isn’t a hard and fast average. You’ll need to talk with your lending provider to find what works best for you.
Another factor that affects the amount of an average business loan is the lending provider.
Business owners who need a large business loan can find those at a large national bank. You should note, most small business owners will probably not qualify for larger loans. Most large banks won’t lend small loans which makes it challenging for small businesses to get a loan.
You’ll need a strong credit score, reliable finances, and have an established business. The average amount is around $564,000.
Smaller banks typically lend out smaller loans compared to larger banks. They are still higher loan amounts that most small businesses don’t need. These loans average around $185,000.
Alternative lenders offer a greater variety of loan types that businesses of all sizes can enjoy. You can get much smaller loans compared to what traditional banks offer. These lenders also can lend larger amounts, upwards of $1 million.
The average loan with an alternative lender is around $80,000. A good choice for smaller businesses that don’t need a large loan.
Ultimately, the amount of an average small business loan depends on your business endeavors. It’s safe to say most small business loans will be around or below $100,000 based on your business ideas and needs.
If you default on your small business loan the lender and the SBA will look to you to pay the debt based on the personal guarantee you will need to sign.
If you have debt from a business loan, or just want to learn more, let us know
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
The client personally guaranteed an SBA 7(a) loan for $150,000. His business revenue decreased significantly causing default and an accelerated balance of $143,000. The client received the SBA's Official 60-day notice with the debt scheduled for referral to the Treasury’s Bureau of Fiscal Service for aggressive collection in less than 26 days. We were hired to represent him, respond to the SBA's Official 60-day notice, and prevent enforced collection by the Treasury and the Department of Justice. We successfully negotiated a structured workout with an extended maturity date that included a reduction of the 14% interest rate and removal of substantial collection fees (30% of the loan balance), effectively saving the client over $242,000.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
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