SBA Lending to New Businesses Under 2 Years Old
SBA Lending to New Businesses
SBA 7(a) FY2024 Lending to New Businesses Under 2 Years Old
Securing a loan as a new business can be particularly challenging. Traditional lenders often hesitate to finance young companies with limited operating history and unproven revenue streams. These lenders prioritize established businesses with a track record of success and a demonstrable ability to repay debt.
Key obstacles for new businesses include limited credit history, insufficient capital, and a lack of collateral. Additionally, high personal debt, operating in a high-risk industry, and inadequate financial documentation can significantly impact loan approval prospects. Lenders carefully assess factors such as the business plan, financial projections, and the owner's creditworthiness before approving a loan.
Conventional lenders are often reluctant to fund emerging businesses that lack a track record or established revenue streams. A minimum of two years of tax returns is typically required. New businesses may find financing “easier” with an SBA loan. Fortunately new businesses under 2 years old is a business age category the SBA tracks and one we are able to utilize analytics to gain helpful insights to new business owners.
New Businesses Under 2 Years Old Receiving SBA Loans
SBA 7(a) Loans in FY2024
672 banks funded 8,088 loans to new businesses under 2 years old from 597 industries. For franchise loans to new businesses under 2 years old there were 157 banks funding 449 loans in 102 industries for 298 brands.
New businesses were funded in all 50 states with borrowers from 2,917 cities. 41 states had a franchise loan funded from borrowers from 358 different cities.
New businesses under 2 years old represented 15% of all funded dollars and 16% of franchisee funded dollars.
53% of banks funded a new business loan with 12% of banks funding a franchise new business loan.
Average loan amount was $385K with the average franchise funded loan at $430K.
There were 838 loans over $1 million loan amount provided to new businesses with 117 going to new franchise businesses.
75% of funded loans to new businesses were provided by out-of-state lenders and 85% of new franchise business loans.
New Business Loan Amount Tiers for SBA Loans
Top Industries for SBA Loans to New Businesses Under 2 Years Old
FY2024: There were 597 industries having a funded loan to a new business over 2 years old and 102 industries for franchise loans.
Geography of SBA Loans to New Businesses Under 2 Years Old
New businesses were funded in all 50 states with borrowers from 2,917 cities. 41 states had a franchise loan funded from borrowers from 358 different cities.
Out of State Lenders Dominate Loans to New Businesses Under 2 Years Old
77% of new business loans up to $150,000 are funded by out of state lenders.
73% of new business loans up to $500,000 are funded by out of state lenders.
79% of new business loans over $500,000 are funded by out of state lenders.
79% of new business loans over $1 million are funded by out of state lenders.
81% of new business franchise loans up to $150,000 are funded by out of state lenders.
74% of new business franchise loans up to $500,000 are funded by out of state lenders.
86% of new business franchise loans over $500,000 are funded by out of state lenders.
85% of new business franchise loans over $1 million are funded by out of state lenders.
Bank Experience With New Business Lending
Working with a bank that has experience and a proven track record in lending to new businesses offers significant advantages. These experienced lenders have an understanding of the unique challenges faced by emerging businesses and and their experience allows them to assess risk more effectively and offer more competitive loan terms to viable businesses.
By matching and partnering with a bank that is willing to provide new business lending, entrepreneurs can increase their chances of securing the necessary funding. LoanBox does exactly this for you. While just over half of SBA lenders funded a new business loan in the last year only 12% did so for a franchise new business and only 15% of all SBA loan dollars last year went to new businesses under 2 years old.
This article is authored by Darin Manis, founder of LoanBox.
Source: All SBA 7(a) data shared is based on all SBA lending from all sources and not from SBA lending through LoanBox. SBA data and reports are not from the SBA but from SBA data from the lending analytics platform developed and maintained by SBADNA Analytics. SBADNA and LoanBox are both owned by the same parent company FuseSync LLC. LoanBox and SBADNA does not validate or verify the data released by the SBA and provides no warranty of data accuracy or completeness.