Restaurant Lending Leads Other Sectors, Study Finds
According to a new study of small business lending trends, approval rates for loans to restaurants, hotels and other food businesses reached 51% in 2018, with lenders approving these loans at a higher rate than other sectors.
The research was conducted by Biz2Credit, an online lending platform. The study looked at funding activity for five different kinds of businesses in addition to restaurants and accommodation, including retail operations, personal services (such as hair salons and yoga studios), healthcare service companies, business service providers (like accountants, legal aides or designers) and IT. Healthcare companies saw the next highest rate of loan approvals at 37%.
Researchers acknowledged the results were surprising: “Restaurants and other food and accommodation businesses are inherently more risky than other types of businesses,” said Rohit Arora, CEO of Biz2Credit who lead the research. “One reason for this result is that many food businesses do not qualify for traditional bank loans, but are able to get funding via nonbank lenders.” These lenders are willing to provide funding, though typically charge higher rates.
More findings from the report:
- Restaurant and accommodation companies received $59,746 in funding on average. Technology companies received the most at $102,029 on average.
- Restaurant funding was highest in New York state, where the average funding level was $106,701—more than $46,000 above the national average. “Businesses in New York, New Jersey, Texas and California all did well,” Arora said. “These states are home to many immigrants and first-generation Americans, who are particularly entrepreneurial. They are also where the real estate markets are strong.”