Online Lenders Beat Credit Unions, Friends, and Family as Primary Source of Credit

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7% of small businesses generating less than $5 million/year in revenue relied on online lenders as their primary source of credit in the last quarter, according to the latest Private Capital Access Index published by Pepperdine Graziado Business School. 3% relied on credit unions as their primary source and 6% relied on friends and family.

Banks were the most popular. 19% relied on large banks as their primary source of credit and 12% relied on community banks.

38% said they didn’t have any source of credit at all.

Sticking with the under $5 million/year segment, 45% of respondents explained that their primary source of credit had become so simply because they were able to qualify for it. 21% said their primary source became so because they couldn’t qualify for any other source.

Meanwhile, merchant cash advances, online business loans, and factors experienced among the lowest reported approval rates for businesses of all sizes. Of those businesses that applied for financing, the success rate in obtaining funds are as follows:


Financing Type Success Rate
Business credit card 65%
Trade credit 57%
Personal loan 51%
Lease 48%
Bank loan 41%
Online lender 38%
Merchant cash advance 31%
Asset Based Lender 28%
Factor 23%
CDFI/Credit Union 18%

While bank loans came in at 41%, revenue was a major determining factor. 88.9% of businesses doing $5 million to $100 million/year in revenue successfully obtained a bank loan while only 31.6% of businesses doing less than $5 million/year in revenue successfully obtained a bank loan.

You can read the full report here.

Last modified: July 15, 2019

Category: Banking, Business Lending, merchant cash advance


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