Lending Index Finds Lenders Divided on Small Business Access to Capital, But Optimistic about Market Improvement

July 25, 2024–US small business lenders have increased requirements to qualify for financing in the first quarter of 2024, but are optimistic that the market will improve, according to the Q1 2024 SMB Lending Index released today by Lendio.

Lendio's SMB lending index measures how accessible business financing is to small business owners with higher scores indicating greater accessibility. The result is based on the business profile of 18k+ small businesses that are offered financing in Lendio's marketplace per quarter.

The Midwest came in with the highest index average of 66 points. Scores in the South varied greatly but the region came in a close second with an average score of 65.7. The industries with the most declines in access to finance include automotive, manufacturing, and utilities. Industries with the largest increases in financial accessibility include education, legal services, and retail.

After surveying 25 small business lenders, Lendio found that lenders' market perceptions are relatively diverse. Lenders who are less optimistic about the market cite poor macroeconomic conditions and high interest rates.

“Many lenders are strengthening their credit boxes, including banks. We are in a sub-optimal macroeconomic situation and there is a high cost of capital right now,” said Minyang Jiang, Chief Strategy/Revenue Officer at Credibly.

In contrast, lenders with a more positive view of the market cite a growing market with an increasing number of different lenders, technological advances, and a variety of financing options.

While the majority of small and medium-sized businesses (SMBs) say their access to capital meets or exceeds the market average, the perceptions of some small business owners are more skewed than lenders.

In a separate report, Lendio found that despite growing options, US SMBs are still underperforming. 65% of SMBs said loan terms and financing rates did not meet or fell below their expectations. SMBs also feel isolated from current lending options as 67% of small businesses do not choose a particular type of lender and 50% do not know what financial solutions their banks offer.

“The current system is not designed for small businesses, so there is a huge market demand waiting to be tapped,” said Brock Blake, CEO of Lendio. “The solution is not to pit banks against other people who lend money or to switch completely to a bank as a-service. Each of these providers has a contribution to make in an ecosystem that fully supports small business owners, whether it is the bank they currently invest in or the retailer that sells them the goods.”

Read the full report here.

About Lendio

Lendio is revolutionizing small business lending by connecting small businesses, lenders, and small business service providers through one integrated technology platform. Lendio offers purpose-built software that automates small business loan decisions and underwriting for both banks and digital lenders, uses AI to match small businesses with financing offers that best meet their needs, and embeds the full small business loan marketplace directly within the small business service. supplier platforms – all working together to enable small businesses to access the capital they need to thrive.

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