Small business loan approval rates vary widely by industry

In a review of 30,000 small business loan applications sorted by industry over the past year, Biz2Credit surprisingly found that food service and accommodation businesses had the highest loan approval rates highest (51%) in 2018 compared to retail, healthcare, and professional and personal services.

According to the study, food and lodging businesses, including hotels, caterers and other food service businesses, experienced an approval rating of over 50%.

Restaurants and other catering and accommodation businesses are inherently riskier than other types of businesses. However, with a strong lending atmosphere, approval rates have been surprisingly high. One of the reasons for this result is that many food businesses are not eligible for traditional bank loans, but can obtain financing through non-bank lenders, who charge higher interest rates but are willing to provide a funding.

Industry Approval rate
Catering & Accommodation 51%
Health care and social assistance 37%
Retail business 36%
Technological Information (IT) 35%
Professional services 31%
Personal Services 16%

Similarly, retail businesses have seen high approval and funding rates on the Biz2Credit platform.

Tech companies lead by average amount funded, followed by retail, restaurants, personal services, healthcare, and business and professional services.

Industry Avg. Amount financed
Technology $102,029
Retail $73,564
Catering & Accommodation $59,746
Personal Services $52,989
Health care $49,835
Business and Professionals $43,248

Tech companies, which have done well in this economy, received the highest average amount of funding. Tech companies have received the highest level of funding in New Jersey, and of those companies, many of them focus on IT staff, which speaks to the shortage of technology skills in a booming industry.

In New York, where new restaurants seem to be opening daily, and that’s where the approval amounts have been the highest. New York is still booming, and travel and tourism are still booming.

Funding for personal services was highest in Texas, while funding for professional services was highest in Massachusetts. For health care, California was the leader.

Industry State Average amount financed national Average amount financed
Technology New Jersey $251,250 national $102,029
Retail New York $121,867 national $73,564
Personal Services Texas $116,154 national $52,989
Restaurant New York $106,701 national $59,746
Business and Professionals Massachusetts $77,538 national $43,248
Health care California $66,010 national $49,835

Companies in New York, New Jersey, Texas and California all did well, especially in information technology and, surprisingly enough, in retail. These states are home to many immigrants and first-generation Americans, who are generally very enterprising. These are also areas where real estate markets are strong.

The industry with the fastest growth in startups is personal services, where the average age of companies was just over three years (37 months), followed by retail (44 months) and food and beverage. accommodation (46 months).

Credit ratings for tech business owners are the highest rated, followed by ratings for business owners in retail, healthcare, food and accommodation, business services, and professional and personal services.

Industry Average credit score
Technology 633
Retail 619
Health care 617
Catering & Accommodation 615
Business and professional services 615
Personal Services 590

Tech companies had the highest average revenues and, unsurprisingly, the highest credit ratings.

Restaurants have the highest revenue. However, they are also high cost/low margin businesses. Healthcare businesses had the second highest average earnings. With the oldest of the baby boomers now reaching their mid-seventh year, I expect businesses that meet their needs will continue to thrive.

Sectoral distribution of companies

Accommodation & Food: Restaurants/bars, caterers, hotels, other food businesses.

Commercial and professional services: Accounting and preparation of tax returns, bookkeeping, payroll services, legal services, marketing and design services, among other activities.

Health care: General medical services, doctors’ offices, dentists’ offices, visiting nurses’ services, residential care facilities, ambulatory care centers (eg physiotherapy), mental health facilities.

THIS: Software developers, consultants, recruitment firms

Personal Services: Beauty (hair and nail salons), gyms, dance studios, yoga studios, laundry and dry cleaning, landscaping, cleaning services.

Retail business: Physical stores, e-commerce businesses, apparel and fashion, florists, grocery stores, pharmacies, home furnishings, and vending machine operators.

For this analysis, Biz2Credit analyzed nearly 30,000 businesses with fewer than 250 employees and less than $10 million in annual revenue across the country that have been in business for more than a year.