C-Suite Wednesday – Half of Online Lender Applicants Seek $50k or Less
August 31, 2022
Delaney Sexton
Contributing Editor
C-Suite Wednesday – Half of Online Lender Applicants Seek $50k or Less
“Consistent with prior years’ survey findings, firms that apply to online lenders are more likely to be newer and have fewer employees, lower revenues, and weaker credit scores. Higher shares of Black- and Hispanic-owned firms apply to online lenders compared to white- and Asian-owned firms,” reads the Clicking for Credit: Experiences of Online Lender Applicants from the Small Business Credit Survey report.
Here are the statistics on online lender applicant demographics:
• No matter the race/ethnicity of the owner or revenue size of the business, all parties were more likely to apply for financing at a bank than an online lender.
• Small businesses with annual revenues of $100,000 to $1 million were more likely to apply for financing at online lenders (19%) than any other group. 16% of firms with annual revenues of $100,000 or less applied to online lenders, and larger-revenue firms rarely applied for financing with online lenders.
• Non-Hispanic Black-owned firms were the most likely to apply for financing at an online lender with 22% applying. 16% of Hispanic-owned businesses applied to online lenders.
• Only 10% of low credit risk firms applied to an online lender, and 7% applied to both a bank and an online lender.
• 20% of medium credit risk firms applied to an online lender while 16% of them applied to both an online lender and bank.
• Over half of high credit risk firms applied to an online lender. 36% only applied to an online lender, and 27% applied to both a bank and an online lender.
• The younger the small business is, the more likely they are to apply to an online lender. 24% of small businesses that were 0 to 2 years old applied to an online lender. Only 10% of firms that were 21 years or older applied to an online lender.
• 18% of firms that were 0 to 2 years old applied to both a bank and online lender, and 5% of firms 21 years or older applied to both.
• Online lender applicants sought smaller amounts of financing with almost half of them seeking $50,000 or less.
• 79% of borrowers that applied to an online lender claimed they applied for financing to meet operating expenses. 38% applied to online lenders to refinance debt.