It’s becoming more and more popular among small businesses, according to data from the latest Federal Reserve SME credit report.
on the other hand Average SBA loan size In 2024, more companies are seeking funding totals of $110,000, $50,000 and even $25,000.
It makes sense that small businesses are exploring the amount of loans, but borrowing small businesses doesn’t always have easy access to fundraising. Companies may face barriers to less funding. For some, seeking the small loan itself can be a hindrance to growth. This is Bankrate’s view on data.
Important take-out of small business loan sizes
Small business, small loans
With the Federal Reserve 2024 Small Business Credit Survey, Over the past 12 months, the most popular loan amounts sought by small businesses have been under $25,000.
According to the survey:
- 23% of small businesses wanted funding for under $25,000
- 17% sought loans between $25,001 and $50,000
- 20% sought loans between $50,001 and $100,000
- 18% sought loans between $100,001 and $250,000
- 15% sought loans between $250,001 and $1 million
- 7% asked for more than $1 million in funding
Small businesses can seek small loans for a variety of reasons. Small loans mean lower risk for small businesses, especially when business owners choose to scale up their business, or use it,
Interest rates are another factor in the size of loans companies are seeking lesser loans.
“Interest rates have not fallen as much as many of the industry expected to date, so some small businesses just have to accept that the rate environment is longer and they will proceed with loan applications.”
The Federal Reserve shifted slowly. Main interest rates The average loan size has decreased from the Sky High Rate. The higher the rate, the more expensive it will be to borrow. This will allow loan borrowers to qualify in revenue and credit.
In 2021, when the prime rate remained at 3.25 throughout the year, the average SBA loan was $704,581. When fees increased, borrowers alked, leading to an average SBA loan in 2025 I’m sitting now It was $435,827, down 38% over four years.
Low-recording companies are looking for smaller loans
Companies with low annual revenues tend to seek funding for less money, perhaps proportional to the growth in funding and operating costs they can afford.
According to the 2024 Small Business Credit Survey:
- 35% of companies with a yearly following $25,000 demand funding of less than $20,000.
- 42% of companies making between $25,001 and $50,000 a year are seeking loans of less than $25,000.
- 39% of companies making between $50,001 and $100,000 a year are seeking loans of less than $20,000.
- 32% of companies making between $100,001 and $250,000 a year are looking for funding under $25,000.
- 25% of companies making between $250,001 and $1 million a year are looking for funding under $25,000.
- 19% of companies that cost between $500,001 and $1 million per year must provide loans of less than $25,000.
- 13% of companies making between $10,000,000 a year are looking for funding under $20,000.
- Five percent of companies making between $50,000,000 a year are looking for funding under $20,000.
- Five percent of companies making more than $10 million a year are looking for funding under $20,000.
Small businesses seeking small loans make sense from a scale standpoint.
In the same survey, more than half of small business owners sought funding to cover expenses such as payroll, utility, construction or equipment leases and other daily expenses. Business owners with low revenues may want loans that are either low operating expenses or proportional to how much their business earns.
Loans under $25,000 were overwhelmingly sought by female business owners.
Female entrepreneurs in particular tend to seek funding on a small scale.
According to the 2024 Small Business Credit Survey:
- Thirty-five percent of women-owned businesses wanted funding of less than $25,000 compared to 19% of men-owned businesses and 24% of ownership companies comparable to 24% of them.
- 16% of women-owned companies were seeking loans between $25,001 and $50,000, compared to 21% of companies comparable to 17% of men-owned companies.
- Twenty percent of women-owned businesses were seeking funding between $25,001 and $50,000, compared to 19% of companies comparable to 20% of men-owned businesses.
- 16% of women-owned businesses wanted funding between $50,001 and $100,000, compared to 18% of men-owned businesses and 21% of companies comparable.
- 11% of women-owned businesses wanted funding between $100,001 and $250,000, compared to 18% of men-owned businesses and 13% of ownership companies comparable to 18% of men-owned businesses.
- Two percent of women-owned businesses wanted more than $1 million in funding compared to 9% of men-owned businesses and 2% of companies comparable.
There are several reasons why female business owners might want to seek small amounts of funding. According to the same survey, more than one in three women-owned businesses made less than $25,000 a year in revenue. This may limit the amount that a female business owner wants to borrow in proportion to how much her business earns.
Also, many female business owners prefer to start small from business and scale up over time. Often, you start with your own personal capital and slowly increase the amount you borrow to scale sustainably.
When Anandita Yadav, owner and founder of cotton clothing company Zillajee, started, he placed his own personal capital on the line to launch the product line.
“I didn’t want to take away the loan at first,” Yadav said. “So I started at $500. Since then, my business has grown profitably. Whatever the profit I earned, I’ve put them back into the business.”
Smaller loans can be a barrier to access
Smaller loans can be a way for businesses to acquire funding more progressively, but they are not always accessible.
For owners, for those who are just starting out, taking out debt proves to be more risky than the entrepreneurs are comfortable with. Especially when the startup loan is competitive. New businesses also tend to be viewed as high risk to lenders.
“Most lenders will expect the business to establish some time before extending credit,” says Miklethun. “The way risk assessments and the smallest size of loans are usually correlated with companies that have little history and should go ahead in terms of repayment ability.”
Many traditional lenders target more loan amounts, with some offerings offerings offerings starting at tens of thousands of dollars.
When Yadav started expanding his business, wanted to buy more inventory and push new products, she struggled to find a loan that would make her profits for the year.
“Everything I read online, anything that relates to funding and investing in the business is focused on medium and large businesses,” Yadav says.
Without access to small loans, small businesses may have problems scaling their businesses, paying operating expenses, weathering late seasons, and handling emergency expenses. However, there are still ways for small businesses to access small loans.
How to Find Small Business Loans
If you are looking for a business loan on the small side, there are a few options.
Business Credit Card
Business Credit Card It offers more flexible financing options for less borrowing. Business credit cards also tend to have more relaxed revenue and business requirements than traditional loans.
There are a few things to keep in mind when considering a business credit card. Many business credit cards have an annual fee. To qualify for a business credit card, you will need to have a credit check and you can limit options for borrowers with low or limited credit history. Similarly, business credit card rates are
Credit business line
a Credit business line It works just like business credit cards with some important differences. In many cases, credit lines are highly restricted, and there are no always annual fees, and there are no lower interest rates than credit cards.
Like a credit card, using a line of credits allows you to draw as much as you want during the draw period. A line of credit may qualify for more than a traditional loan, allowing you to borrow a small amount. However, the business line often requires a certain minimum revenue amount, business and credit score time. A credit line may also require you to protect your loan collateral Or a Personal guarantee.
SBA Micro Loan
be Small and Medium Business Management (SBA) Loan It is aimed at business owners looking for a small number of loan amounts known as microloans. SBA Micro Loan It is guaranteed by the government and provides up to $50,000 in funding to qualified borrowers. It has more relaxing requirements than other types of SBA loans and comes with a rate cap that helps keep your borrowing costs down.
SBA microloans require either collateral or personal guarantees. They also have a more limited pool of lenders as they are provided by nonprofits rather than traditional lenders. They can reduce borrowing costs and ease credit requirements, but they may be difficult to qualify, require more documentation and have longer waiting periods.
Opportunity Loan Program
If you are part of an underserved community, you can qualify for the Opportunity Loan Program. These programs provide financing that reduces borrowing costs to borrowers who may otherwise struggle with access to capital.
“There is a class in the economy that has not had the same economic opportunity and is beginning to be smaller,” says Mikletun. “We have a program called the Business Diversity Lending Program, available to women-owned women, veteran-owned and minority-owned businesses. We offer a somewhat changed credit standard aimed at dealing with historically economically disadvantaged classes.”
Talk to your lender to see if such options are available or look for a lending program in your area that specializes in funding opportunities.
Conclusion
Access to small business loans is essential for American small business owners. Loans under $25,000 are popular among entrepreneurs, but access to these types of loans is particularly challenging for new businesses and businesses with limited revenue and credit history, especially as a way to save on borrowing costs and reduce default risk. This proves to be a barrier to access, especially for businesses that rely on small loans, such as women-owned companies.
Entrepreneurs seeking small business loans may have access to funding in the form of credit cards, credit lines, SBA microloans, or opportunity funding programs.
