A recent survey conducted by Lendio, the USA’s leading small business financial solutions provider, revealed that small business lending remains stable despite the turbulence in big banks caused by the FDIC’s recent takeover of two large banks. The survey polled the top 21 lenders and funders in Lendio’s marketplace to better understand the current state of lending and access to funds for U.S. small-and-medium-sized businesses (SMBs).
The poll found that 100 percent of the surveyed lenders and funders reported no change in their lending capacity, indicating stability in the state of small-and-medium-sized business lending. All respondents reported no change to their liquidity, further showing stability for the industry. However, approximately 38% of respondents said they are evaluating potential changes to their underwriting criteria, suggesting some heightened aversion to future risk.
Small businesses are a bedrock in our communities and for our economy, and maintaining access to capital and funding options is crucial to their growth and continued impact. Brock Blake, co-founder and CEO of Lendio, said, “In the face of recent commotion and changes at larger banks, it’s important to see this data around the resilience of SMB funding and offer reassurance to SMBs across America. Lendio remains committed to being an integral part of and connector in a world where small businesses survive—and thrive.”
According to data from the White House and the U.S. Small Business Administration (SBA), small businesses in the U.S. employ 61 million people, nearly 50 percent of all private-sector workers. Domestically, gross revenue from small businesses totals $13.3 trillion. Therefore, the stability of small business lending is critical to the overall health of the U.S. economy.
Mark Cottle, Lendio Executive Vice President, stated, “In speaking with our funding partners over the past several days, we are pleased to see the stability and confidence there for SMBs. In 2021 and 2022, the U.S. saw more small business funding applications than ever before, and we’re eager to support these businesses as they grow, scale and seek funding partners to help them realize their dreams.”
Startup Failure Rate Statistics by Lendio
Startup companies are known to contribute to economic growth and innovation, with the potential to disrupt traditional industries and create new markets. However, starting a business is a risky venture, and statistics show that the majority of startups fail within the first few years of operation. Here we take a closer look at the startup failure rate statistics and some of the challenges entrepreneurs face.
According to the Bureau of Labor Statistics (BLS), 21% of new businesses fail within the first year. Surviving the first year is crucial, but it is not enough for long-term success. Nearly half of all startups fail by year five. This highlights the need for sustained growth, innovation, and adaptability to keep a business thriving over the long term.
Location can be a significant factor in a startup’s success or failure. Lendio reports that Oregon, South Dakota, Mississippi, California, and Massachusetts have the highest five-year survival rates of 55% or more. Missouri has the highest five-year failure rate at 60.5%. This may be due to a variety of factors, such as a less-supportive business environment, lower access to capital or talent, or other systemic barriers. Source: Lendio
Starting a new business is an exciting and rewarding experience, but it is also a daunting task that comes with a host of challenges. From securing funding to developing a viable product or service, entrepreneurs face numerous obstacles that can make or break their business.
According to Lendio, 41% of small business owners state their No. 1 challenge is related to the economy and inflation, with another 14% dealing with other financial concerns. This highlights the need for small businesses to carefully monitor economic conditions, manage cash flow effectively, and seek out resources and support to overcome financial challenges.
Large corporations have a negative impact on growth opportunities for 56% of small businesses. This may be due to competition for customers or talent. Small businesses may need to focus on developing unique value propositions, building strong customer relationships, and seeking out niche markets where they can excel.
Access to capital is also a significant challenge for many startups, with 52% of businesses stating that it would have had a significant impact on their ability to start a successful business. This highlights the importance of a robust and accessible financing ecosystem, including traditional loans, venture capital, and alternative sources like crowdfunding.
When it comes to funding options, the majority of businesses are started with personal funds. Lendio reports that 54% of SMB owners started their businesses with personal funds, 43% of small business owners needed less than $10,000 to fund their startup, and only 3% of startups are funded through venture capital firms. Colorado, Utah, and Minnesota have the highest access to small business loans, while Massachusetts, California, and New York have the highest amount of venture capital disbursed per $1 million of GDP. In 2021, early-stage funding totaled $201 billion, and global venture funding was more than 10x higher in 2021 than in 2012.
Kickstarter has successfully funded more than 200,000 projects totaling $6.5 billion in successful funding, with 40% of Kickstarter projects successfully funded. Moreover, 66% of Kickstarter startups raise $10,000 or less, and 77% of tech Kickstarters fail.
Source:https://www.kickstarter.com/help/stats
Unicorn startups, privately-held startups with a valuation of $1 billion or more, represent only a small fraction of all startups, but their impact on the economy and the technology landscape is significant. According to CB insights, there are 1,206 unicorn startups worldwide valued at ~$3791 billion dollars. Bytedance, an artificial intelligence company in China and the parent company of TikTok, has the highest valuation at $140B.
About Lendio
Lendio is the nation’s leading small business financial solutions provider, enabling small business owners to apply for multiple business financing options with a single application through its diverse network of lenders. Lendio has facilitated more than 330,000 small business loans for more than $13 billion in total funding, including $9.8 billion in PPP loan approvals as part of government COVID-19 relief. The company has become the fintech company to watch in the industry, helping reduce bias in lending and cutting back on loan approval time exponentially. In addition to creating access to small business capital, Lendio offers time-saving financial SaaS products designed to streamline business operations.
Lendio is a mission-driven organization striving to provide equal access to capital to underserved communities and America’s smallest businesses. For every new marketplace loan Lendio facilitates, Lendio Gives—an employee-contribution and employer-matching fund—in partnership with KIVA, provides a microloan to low-income entrepreneurs around the world, continuously re-investing the fund.
