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Small Business Lending Report 2020: The Businesses Most Likely to Receive Funding

Eric Goldschein

Eric Goldschein

Eric is the partnerships editor at Fundera with nearly a decade of experience in digital media. He has written for a number of outlets including Business Insider, HuffPost, Men's Journal, BigCommerce, Volusion, Square, RetailNext, and Keap, covering entrepreneurship, finance, marketing, and small business trends. He graduated from the University of Pittsburgh with degrees in history and English writing. Email: eric@fundera.com.
Eric Goldschein
Editorial Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone.

America’s small businesses run on the tireless effort and ingenuity of their owners and employees. They also require capital or funding—otherwise known as the cash to cover overhead costs, make repairs, fund expansion, upgrade equipment, or even buy another business. 

While some startups are lucky enough to be buoyed by venture capital, most U.S. businesses (and remember, U.S. small businesses make up 99.7% of the country’s employer firms) turn to some kind of small business loan to help them survive and thrive. 

As 2020 kicks into gear, it’s time to take a look back at how small businesses were able to acquire the money they needed to succeed over the past 12 months in Fundera’s State of Small Business Lending Report 2020. Which types of businesses were most likely to obtain funding? Which were able to obtain the most capital? What loan products did America’s businesses choose, and why

Fundera is uniquely positioned to address these questions. To date, Fundera has helped facilitate over $1 billion in funding for thousands of U.S. small businesses, by connecting business owners with loan products from alternative lenders, SBA lenders, and banks.

The State of Small Business Lending is Fundera’s review of funding access, availability, and cost for small business owners. For this report, we analyzed internal data from 20,041 records submitted between January 2019–December 2019, from small businesses across 47 industries that sought a financial product through Fundera’s platform.

Here are the key results:

  • The average small business secured $39,577 in loans from a mix of top banking and alternative lenders.
  • The majority of small businesses61%—sought funding for working capital, meaning money for use in day-to-day operations. 
  • The 10 businesses that were most likely to receive funding in 2019 were Software Development, Miscellaneous Retail, Law Firms and Attorneys, Auxiliary Home Services, Auxiliary Health Services, Interior Decoration and Design, Strategy/General Consulting, Recreation, Retailing Electronics, Building Materials and Home Furnishing.
  • Some of the businesses that received the most funding overall through Fundera’s platform in 2019 also included: Alcohol, Physicians/Doctor’s Offices, Manufacturing Other Merchandise, Dentistry, Hotel/Motel/Lodging.
  • The average revenue of a small business that sought funding through Fundera was $470,129, with an average annual profit of $94,752.
  • The average personal credit score (Experian FICO 8) of small business owners was 657, and the average business credit score (FICO SBSS) of 170.

In this report, we’ll highlight the industries that received the most funding, as well as the industries that were most likely to receive funding—and why. 

As you can already see, funding success was hardly concentrated in one industry. Likewise, the purpose and type of the loans Fundera helped facilitate were varied, meaning that many businesses use business financing to achieve all kinds of goals, from expansion to covering payroll gaps. 

Takeaways 

  1. High annual revenue was a better predictor of funding success than annual profit. Generally speaking, with alternative lenders, high annual revenue is a more important metric than annual profit, as it demonstrates the viability of your business and your ability to repay loan debt. This bore out in our results—every business in the top 10 displayed above-average revenue (while not always reporting above-average profit) relative to all industries. 
  2. Personal and business credit were also highly correlated with obtaining funding. One of the most important factors that a lender considers during a loan application is the business owner’s personal credit score. Every FICO 8 score (personal credit score) of the 10 businesses in our most likely to fund list was above average. Only two businesses from that list had lower-than-average FICO SBSS business credit scores, as well. 
  3. Businesses most often sought funding for day-to-day operations. More than half of Fundera’s applicants said they needed working capital. Other top reasons for seeking a loan included expansion (13.5%), purchasing equipment (9.5%), and refinancing or consolidating existing debt (7.5%). Capital for marketing/advertising, buying another business, and remodeling an existing location also made the list. 
  4. Short-term funding was the primary source of capital. Short-term lines of credit and short-term loans were the top-ranked and second-ranked loan products obtained by small businesses, respectively. Medium-term loans and SBA loans were third and fourth on the list.
  5. When businesses secured an SBA loan, they were able to obtain major capital. The average short-term loan through Fundera granted businesses $52,709. The average SBA loan through Fundera, meanwhile, funded for $211,355. 
  6. Even when businesses funded, it was rarely for the amount they needed. Rarely will a business receive every dollar they seek from a small business lender. They often receive just a portion of the amount they applied for. In 2019, businesses that applied for a loan received an average of 28.5% of what they sought. This speaks to how lenders view small businesses, as well as how business owners need to better prepare for the application process beforehand. 

The 10 Businesses Most Likely to Receive Funding in 2019

infographic of 10 business most likely to receive funding in 2019

Here’s an in-depth look at the 10 businesses that were most likely to obtain some kind of loan product in 2019 through Fundera:

1. Software Development

Any business that deals in creating, testing, and maintaining software components such as applications and frameworks fall into the Software Development category—number one on this list. In our software-heavy economy, even small businesses have been able to carve out a powerful niche in an industry dominated by the likes of Google and Facebook. 

Software development firms had $780,507 in average annual revenue, and $90,748 in average annual profit

The standout number for this field was personal credit score: The average Experian FICO 8 score for these business owners was 704, the second-highest average personal credit score of any industry we measured. The average FICO SBSS was an impressive 177 as well. 

These businesses received $52,688 in average funding, 33.1% higher than the average funding for all industries

2. Miscellaneous Retail

As you probably know, not every business fits into a neat category. Fundera applicants choose from multiple retail categories when filling out a loan application. Some retailers, such as bookshops and toy stores, don’t fall into specific retail categories. This collective Miscellaneous Retail category performed very strongly in 2019. 

Businesses in this industry had an average of $794,829 in annual revenue and $67,726 in annual profit. Their credit scores were relatively strong, with an average FICO 8 of 691 and an average FICO SBSS of 172

In all, this industry received an average of $48,820 in funding, 23.4% higher than average

3. Law Firms and Attorneys

Every year is a good year to run a law firm or to have a private law practice. As they say, “You win some and you lose some, but you get paid for all of them.”

Law firms and attorneys rode this truism to above-average revenue—$601,517 in average annual revenue, and extremely high profits: $146,566 in average annual profit last year. Their average annual profit was a whopping 54.7% higher than the average across all industries. Only one other industry (Religious Evangelism and Related Services) that applied for funding with Fundera had a higher average profit.  

Credit scores across this industry were also quite high: The average FICO 8 was 704.4 (the highest of any industry we measured), and the average FICO SBSS was 179

This industry received $45,070 in average annual funding, which was 13.9% higher than the average. These results demonstrate how much more important revenue can be to lenders than profit, as extremely high profits did not boost this field’s funding win rate past the other top industries. 

4. Auxiliary Home Services

This industry comprises a collection of home-related services separate from interior design and landscaping, including home construction, real estate, home security, pest control, movers, waste management, and other related fields. 

Overall, the field brought in $703,057 in average annual revenue, and $79,154 in average annual profit. Another telling number: The average age of businesses in this industry that applied for funding was 8.5 years, putting it in the top 10 in that category. Lenders prefer to extend funding to well-established businesses. 

The industry received an average of $43,089 in funding, 8.9% above the average

5. Auxiliary Health Services

The combined industry that includes private medical practices, home healthcare providers, counseling and therapy services, and medical device suppliers came in at fifth on our rankings. 

As you might imagine given the ever-present need for these services, the strength of this industry is in its revenue. These businesses had $871,392 in average annual revenue—the second-highest number of any industry we measured—as well as $105,870 in average annual profit

In total, health services and providers obtained $57,589 in average funding, an impressive 45.5% above average. Very strong revenue and well-above-average profitability may have helped these businesses despite above-average but not outstanding credit scores (an average Experian FICO 8 of 678, and an average FICO SBSS of 174).

6. Interior Decoration and Design

Rising rates of residential and commercial construction have helped the field of interior decoration and design see steady growth over the last five years. And since few to zero companies dominate the field nationally, it’s truly one where small businesses can thrive. 

This industry pulled in a relatively modest (by top-10 standards) $633,128 in average annual revenue and $94,988 in average annual profit in 2019. These businesses are built to last—they had an average age of 8.4 years.  

As a result, they received an average of $46,519 in funding last year, 17.5% more than the average

7. Strategy/General Consulting

The field of strategy/general consulting provides advisory services to other businesses, nonprofits, agencies, and organizations across the country. As the economy grows, so too does this industry. 

This industry pulled in $794,763 in average annual revenue, and $93,200 in average annual profit. Strong personal credit scores were key here: The average FICO 8 score was 692. FICO SBSS scores were above-average as well, at 175

As a result, this industry received an average of $52,853 in funding last year, a strong 33.6% above average

8. Recreation

The wide-ranging field of recreation includes sporting goods stores, home theater businesses, golf cart dealerships, and even the occasional ghost tour business. 

From a revenue and profit standpoint, this was the weakest industry in the top-10. Recreation businesses pulled in $626,492 in average annual revenue, and $72,141 in average annual profit—a below-average figure. 

What may have buoyed the field into the top 10: Strong personal credit scores (average FICO 8 scores of 678) and relatively modest funding needs. Recreation businesses took in an average of just $29,794 in funding, which was 24.7% less than average and the second-lowest on this list. 

9. Retailing Electronics

Stores that sell consumer electronic devices (including phones and wireless speakers)  and related products, such as LED lighting and appliances, make up the Retailing Electronics industry. 

Retailing electronics businesses took in $860,380 in average annual revenue, and $84,629 in average annual profit

Strong revenue numbers, as well as strong personal credit scores (an average of 687, the sixth-highest overall in our rankings) helped this industry pull in the most funding of any industry on our list: an average of $61,920 in funding in 2019, 56.5% more than average

10. Building Materials and Home Furnishing

Rounding out the top 10 is another industry that is bound to boom whenever the economy is strong. Building Materials and Home Furnishing businesses manufacture or sell materials for residential or commercial construction and furnishing. 

This industry pulled in $658,518 in average annual revenue, and $91,671 in average annual profit. Relatively modest FICO 8 scores (660) and FICO SBSS scores (168) were offset by a high average business age of 8.2 years

In addition, this field also sought the least amount of funding, on average, of any industry in the top 10. As a result, they received just $28,740 in funding, 27.4% less than average

The 10 Businesses That Received the Most Funding in 2019

infographic of 10 businesses that received the most funding in 2020

The companies that funded most frequently after applying for a loan product doesn’t tell the whole story of small business lending. Some businesses were able to qualify for more funding, overall, on average. (A few industries were good at both: You’ll see some crossover between the two lists of businesses.)

What may have separated the businesses that received the most funding from their counterparts that funded most frequently is their ability to secure longer-term loans that typically include higher dollar amounts. 

For example, nationwide the average SBA loan amount is for about $107,000, compared to just $20,000 for short-term loans. 

Here’s a rundown of the 10 businesses that received the most small business funding in 2019 through Fundera: 

  1. Retailing Electronics: $61,920.38 in average funding (56.46% more than average)
  2. Auxiliary Health Services: $57,589.77 in average funding (45.52% more than average)
  3. Alcohol: $57,531.57 in average funding (45.37% more than average)
  4. Creative/Marketing: $56,198.75 in average funding (42.00% more than average)
  5. Physicians/Doctors Office: $53,086.02 in average funding (34.13%% more than average)
  6. Strategy/General Consulting: $52,853.17 in average funding (33.55% more than average)
  7. Manufacturing Other Merchandise: $52,748.81 in average funding (33.28% more than average)
  8. Software Development: $52,688.21 in average funding (33.13% more than average)
  9. Dentistry: $52,462.16 in average funding (33.56% more than average)
  10. Hotel, Motel, Lodging: $51,138.88 in average funding (29.21% more than average)

Compare the success these industries had with that of the bottom five industries that applied for funding with Fundera, all of which sought an average of over $100,000 in funding: 

  • Florists: $27,279.16 in average funding (31.07% less than average) 
  • Fitness Training, Scuba & Skydiving: $26,727.48 in average funding (32.47% less than average)
  • Insurance Agencies: $20,141.64 in average funding (49.11% less than average)
  • Investment/Speculative: $18,955.00 in average funding ( 52.11% less than average)
  • Religious Evangelism & Related Services: $15,300.00 in average funding (61.34% less than average) 

The 10 Businesses With Smallest Funding Gap

Our final way of breaking down the relative success that certain industries had through Fundera is by examining the funding gap, as demonstrated through “funding gap percentage.”

Funding gap percentage is the amount of funding received relative to the total amount requested when applying for a loan. 

Lenders rarely extend the full amount of money that a business requests on their loan application. There are a few possible reasons for this. One is that the business approached lenders with an unrealistic assessment of their strengths—with lower revenue, or credit scores, than they needed to score more funding. 

Another is that, occasionally, businesses overstate how much funding they think they need from a lender, almost like a negotiating tactic.  

Whatever the reason, when lenders don’t extend full financing to small businesses, it leads to funding gaps as businesses move ahead without the full amount of capital expected.

Some businesses were better than others at presenting their case for funding. The businesses with the lowest funding gap percentage include: 

  • Apparel & Fashion: Received 56.80% of requested funding. 
  • Alcohol: Received 54.54% of requested funding. 
  • Retailing Electronics: Received 49.22% of requested funding.
  • Landscaping, Home Repair & Upkeep: Received 48.15% of requested funding.
  • Tax Accounting & Consulting: Received 48.02% of requested funding.
  • Interior Decoration & Design: Received 47.24% of requested funding.
  • Catering & Service: Received 44.82% of requested funding.
  • Automotive Supply & Repair: Received 43.96% of requested funding.
  • Strategy/General Consulting: Received 42.38% of requested funding.
  • Architecture & Landscape Design: Received 40.27% of requested funding.

Many of the businesses on this list were also able to fund more often and for more capital than most other industries, but all of them were clearly seen as safer bets to repay their loans—leading to their receiving higher-than-average percentages of their requests.  

Compare these numbers to the bottom five industries in terms of how much of their funding request they received: Fitness Training, Scuba & Skydiving (16.23%), Hotel, Motel, Lodging (13.16%), Printing (10.44%), Investment/Speculative (7.57%), Religious Evangelism & Related Services (7.54%).

Overall, businesses received 28.5% of their requested funding on average

The Reasons Businesses Sought a Loan in 2019

There are many paths for small businesses that bring them to the decision to seek debt financing. 

The most common reason we see is to get funding to cover working capital needs. “Working capital” encompasses a number of important, day-to-day tasks—including payroll, inventory, and overhead costs like rent and utilities. 

That’s far from the only reason, however. Here’s a breakdown of the reasons small businesses came to Fundera to take out a loan: 

While working capital (funding for day-to-day operations) was the top reason for taking out a loan in 2019 at 61.11%, a sizable number of businesses sought funding for expansion (13.56%), purchasing equipment (9.55%), or refinancing/consolidating debt (7.51%). Marketing/advertising, buying an existing business, and remodeling an existing location filled out the list. 

The Loan Products Businesses Received in 2019

As we’ve discussed, small businesses seek financing for a variety of purposes, depending on their industry, current revenue and profitability, short- and long-term goals, and previous credit history.

No one type of financing fits all needs, and different businesses may consider the same loan product desirable for different reasons. 

That being said, the primary reason businesses visit Fundera is to secure short-term financing. That’s because few small businesses will qualify for a long-term bank loan—not only because they may not qualify for a bank’s strict lending standards, but because the financing needs for small businesses are often not enough for banks to justify the underwriting and collections processes. 

Therefore, even when a small business approaches the loan application process seeking longer-term financing, their best bet is often a short-term loan or line of credit that can aid their growth and eventually help them qualify for bigger, longer-term loans. 

Here’s a look at the loan products small businesses received in 2019: 

By far the most popular form of financing on Fundera in 2019 was a short-term line of credit (LOC). Business owners prize LOCs for their flexibility—you can draw on them as needed, similar to a credit card. The average LOC through Fundera funded for $19,343

The number two option was short-term loans, funding 27.18% of small business owners. These business owners received an average of $52,709 through short-term loans. These two forms of financing are much easier to obtain than longer-term loans, and have quicker underwriting periods as well. 

Medium-term loans (5.37%) and SBA loans (3.36%) were third and fourth on the list, respectively. The average medium-term loan went for $86,382, while the average SBA loan funded at $211,355

Invoice financing, equipment financing, and the occasional merchant cash advance closed out the list, all under 2%. 

The exact interest rates and other fees that each business pays on these loans vary on a case-by-case basis. Here’s a rundown of the typical annual percentage rate (APR) ranges of each major loan product

  • Traditional Bank Loans: 3% to 6% APR
  • SBA Loans: 7.5% to 10%
  • Medium-Term Loans: 7% to 30% APR
  • Equipment Financing: 8% to 30% APR
  • Business Lines of Credit: 7% to 36% APR
  • Invoice Financing: 10% to 60% APR
  • Short-Term Loans: 10% to 80% APR
  • Merchant Cash Advances: 40% to 150% APR

Full Industry Ranking: Businesses by Funding Rate in 2019

Here’s the full ranking of the 47 industries that applied for funding on at least 100 occasions on Fundera during 2019. Industries are ranked in order of their success in receiving funding:

Industry Avg. Funded Amount Avg. Annual Revenue Avg. Annual Profit Avg. Personal Credit Score Avg. Business Credit Score
Software
Development
$52,688.21
$780,507.78
$90,748.61
704.0
177.3
Miscellaneous Retail
$48,820.61
$794,829.37
$67,726.03
691.4
171.7
Law Firms &
Attorneys
$45,070.83
$601,517.06
$146,566.72
704.4
178.6
Auxiliary
Home
Services
$43,089.75
$703,057.66
$79,154.86
688.6
171.9
Auxiliary
Health
Services
$57,589.78
$871,392.74
$105,452.52
678.4
173.8
Interior
Decoration
& Design
$46,519.85
$633,128.05
$94,988.21
678.2
169.6
Strategy/
General
Consulting
$52,853.17
$794,763.01
$93,200.28
692.5
174.9
Recreation
$29,794.79
$626,492.51
$72,141.78
678.4
172.5
Retailing
Electronics
$61,920.38
$860,380.09
$84,629.42
686.6
169.1
Building
Materials
& Home
Furnishing
$28,740.28
$658,518.81
$91,671.81
659.7
167.8
Creative/
Marketing
$56,198.75
$666,986.05
$120,231.31
678.9
172.4
Architecture
& Landscape
Design
$47,363.86
$709,268.09
$117,980.32
674.3
169.3
Construction
& Materials
$36,525.98
$835,360.68
$92,956.98
659.2
166.6
General
Contractor
$35,184.10
$827,715.75
$105,216.16
656.2
167.4
Tax Accounting
& Consulting
$45,669.74
$427,605.11
$96,583.42
672.1
170.8
Restaurant, Cafe
or Bar-Lounge
$41,516.71
$763,504.44
$74,428.40
668.9
170.3
Child Day Care
$37,701.39
$536,037.83
$65,544.35
657.7
170.7
Manufacturing
Other
Merchandise
$52,748.82
$873,379.74
$109,687.52
676.1
172.0
Online Services
$37,298.57
$711,484.60
$112,693.10
670.6
171.3
Print Publication
& Magazines
$39,225.00
$748,842.89
$95,223.23
681.0
175.0
Physicians/
Doctors Office
$53,086.02
$685,704.93
$136,563.72
682.7
175.2
Automotive
Supply
& Repair
$47,161.89
$616,992.26
$80,781.22
656.0
167.3
Trucking &
Commercial
$31,533.68
$607,091.18
$78,020.05
654.8
164.0
Hotel, Motel,
Lodging
$51,138.89
$762,467.27
$138,238.03
676.2
168.8
Grocery and
Baked Goods
$34,797.51
$753,470.62
$85,657.65
662.1
162.8
Apparel &
Fashion
$44,547.37
$547,608.15
$78,107.56
656.6
170.8
Landscaping,
Home Repair
& Upkeep
$41,579.05
$520,054.85
$66,907.85
650.1
164.4
Beauty Salon,
Barber, Spa
$28,856.83
$385,475.80
$63,757.22
659.8
167.4
Ecommerce
$35,653.19
$643,503.05
$87,995.75
664.6
168.3
Travel Planning
& Services
$40,872.61
$673,547.66
$95,354.40
661.6
170.9
HVAC &
Plumbing
$38,977.71
$743,805.23
$102,510.25
643.3
163.3
Cleaning
$30,983.47
$571,838.99
$82,183.92
649.7
167.3
Dentistry
$52,462.16
$661,192.65
$112,637.43
685.3
179.6
Apparel &
Accessories
$38,468.92
$698,666.27
$106,568.11
675.2
173.7
Veterinary
Clinic
$47,095.29
$679,365.17
$126,925.49
660.4
169.2
Alcohol
$57,531.58
$742,254.64
$121,427.15
646.7
169.2
Insurance
Agency
$20,141.64
$530,804.30
$109,586.96
662.8
166.6
Fitness Training,
Scuba & Skydiving
$26,727.49
$443,781.02
$69,299.04
674.2
174.8
Shuttles, Buses
& Personal
$28,317.37
$548,193.52
$107,610.99
637.7
162.5
Catering &
Service
$45,662.34
$505,313.18
$73,712.16
655.5
175.7
Printing
$34,496.17
$775,761.40
$120,921.69
651.5
173.1
Automotive,
ATV, Motor
Homes &
Motorcycles
$44,463.95
$862,694.47
$111,156.04
669.1
166.8
Florists
$27,279.17
$483,239.80
$99,570.55
657.9
177.8
Livestock
$33,170.54
$657,814.80
$110,055.66
660.0
179.0
Investment/
Speculative
$18,955.00
$526,357.93
$131,222.78
662.5
168.2
Religious
Evangelism
& Related Services
$15,300.00
$568,783.09
$148,267.61
635.9
168.5
Automotive & Bicycle
$29,368.75
$661,099.77
$121,137.75
659.1
166.5

Methodology

To put together our State of Small Business Lending report, we looked at data from Fundera’s loan platform between Jan. 1, 2019, and Dec. 15, 2019. We reviewed the records of businesses in industries that had at least 100 first-time applications in order to eliminate outliers, reducing our number of eligible industries to 47. 

When applying for financing on Fundera, small business owners must self-select an industry, loan purpose, and estimated funding amount. They also need to self-report average annual revenue and average profit. For each metric, we compared the industry average to Fundera’s overall average. We ranked the industries based on funding rate or “win rate,” the percentage of businesses that successfully obtained funding for the first time in each industry out of the businesses that applied.

Fundera pulls Experian FICO 8 personal credit scores on all verified business loan applicants. These personal credit scores fall on a 300 to 850 range, with a higher number meaning better credit. For business credit scores, Fundera obtains credit authorization and then submits the borrower’s name, zip code, and Social Security number to Experian. Experian looks for a match on those values and returns a score to Fundera. These scores range from 0 to 300, with a higher number meaning better credit. 

The Bottom Line

The last 12 months were a mixed bag for small businesses. While some saw record revenue and profits partially thanks to the health of the overall economy, others were hit by tariffs or found themselves the victim of changing market tides. 

Things were particularly good for those that made our list of businesses that were most likely to get funding. These industries are an excellent example of what a successful small business looks like, and what businesses in other industries need to do to emulate their ability to obtain affordable financing for future growth. Focusing on boosting revenue, improving your credit scores, and finding the right loan product for you matter greatly to your success.

Eric Goldschein

Eric Goldschein

Eric is the partnerships editor at Fundera with nearly a decade of experience in digital media. He has written for a number of outlets including Business Insider, HuffPost, Men's Journal, BigCommerce, Volusion, Square, RetailNext, and Keap, covering entrepreneurship, finance, marketing, and small business trends. He graduated from the University of Pittsburgh with degrees in history and English writing. Email: eric@fundera.com.
Eric Goldschein