Lendio Study Reveals Funding Challenges for Mom & Pop Businesses

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In spite of their disadvantages, independent businesses use small-dollar loans to create opportunities for growth

Every business needs access to capital, not only to operate but to grow. Unfortunately, the traditional lending ecosystem isn’t set up to support mom and pop shops.

A Lendio study of more than 7,000 of its mom and pop business customers reveals unique funding challenges and opportunities for the smallest businesses across the U.S.

For the purposes of this study, Lendio defined mom and pop businesses as those with four or fewer employees. The study found that while on average, mom and pop businesses take on significantly smaller loans than other small businesses, mom and pops leverage a greater percentage of their monthly sales in order to take on financing.

Key findings include:

  • The average loan amount for mom and pop businesses is $23,081. The average loan amount for non-mom and pop businesses is $54,188.
  • The average loan amount for mom and pop businesses represents a greater percentage of monthly sales than the average loan amount for other businesses (83.2% and 73.2%, respectively).
  • Mom and pops’ average time in business is 5.6 years compared to 7.4 years for larger businesses.
  • Mom and pop businesses’ monthly revenues are on average $35,000 less than their non-mom and pop business counterparts.
  • On average, mom and pop businesses in the West make 43.3% of their larger counterparts’ monthly revenue. In the South, mom and pop businesses make an average of 37.5% of their larger counterparts’ monthly revenue.
  • The average credit score for a mom and pop business owner is 30 points lower than that of other small business owners.
  • On average, mom and pop businesses require twice as many interactions with a lending expert, compared to larger businesses, to guide them through the funding process.

In spite of these funding challenges, mom and pop business owners are using online lending to access small-dollar loans. Independent businesses represent 53% of the customers funded through Lendio’s online marketplace, and their loans account for 34% of the total loan volume funded. Common financing needs among mom and pops include equipment purchases, payroll and new business opportunities.

“Every business needs access to capital, not only to operate but to grow. Unfortunately, the traditional lending ecosystem isn’t set up to support mom and pop shops,” said Brock Blake, CEO, and founder of Lendio. “Online lending helps bridge the gap, offering more diverse types of financing to meet the needs of the nation’s smallest businesses.”

Access to capital allows mom and pops to keep their doors open and increase their economic impact. According to a national study on the economic benefits of online lending to small businesses, for every dollar lent to a small business, its sales increased an average of $2.31. Even more, that same borrowed dollar creates an average of $3.79 in gross output to local communities.

“Mom and pops aren't solely focused on their own success," continued Blake. “These businesses create neighborhoods, enhance the sense of community, carry on local traditions, and contribute to local causes in ways that big businesses just can’t.”

Lendio is the nation’s largest marketplace for small business loans. Through more than $260 million in loans, Lendio has facilitated financing for more than 7,000 mom and pop businesses across the country. In total, Lendio has facilitated more than $1.3 billion in loans to U.S. small businesses, which in turn have generated an estimated $4 billion in gross economic output.

About Lendio
Lendio is a free online service that helps business owners find the right small business loans within minutes. With a network of over 75 lenders offering multiple loan products, Lendio’s marketplace is the center of small business lending. Bringing all options together in one place, from short-term specialty financing to long-term, low-interest traditional loans, our technology makes small business lending simple and decreases the amount of time and effort it takes to secure funding. For every loan facilitated on Lendio’s marketplace platform, Lendio Gives, an employee contribution and employer matching program, donates a percentage of funds to low-income entrepreneurs around the world through Kiva.org. More information about Lendio is available at http://www.lendio.com. Information about Lendio franchising opportunities can be found at http://www.lendiofranchise.com.

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Melanie King
Lendio
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