Nav Report Finds The Smallest Businesses Aren’t Treated Equally When Securing Financing

Nav Report Finds The Smallest Businesses Aren’t Treated Equally When Securing Financing

SALT LAKE CITYDec. 10, 2020 /PRNewswire/ — Today, Nav, the simple and intelligent financing platform for small businesses, released a report showing that for very small businesses (VSBs) securing financing is much more difficult than it is for their small- and mid-sized counterparts. This gap comes in the form of likelihood of approval, ability to find the right offer, resources to complete an application and more.

Nav surveyed 500 small business owners and examined their experience and expectations with business financing right now, a time when access to capital is especially vital. Small and medium-sized businesses (SMBs) are already vulnerable, with cash buffers of just 27 days, but this year the fight for business survival is particularly difficult. In 2020, roughly 100,000 businesses have closed due to COVID-19. For context, SMBs make up 99.9 percent of businesses in the U.S., account for 1.5 million jobs annually and drive about 44 percent of U.S. economic activity. VSBs make up about 17 percent of that pool, representing the first and most precarious stage of any new venture.

“The smallest businesses often come to the table with fewer resources and less experience with the lending landscape. On top of that, the traditional banking system is not set up to serve their needs—this year made that only more glaringly obvious,” said Greg Ott, CEO at Nav. “Nav’s new report suggests the same narrative that was evident after the last major U.S. recession: the smallest businesses are least likely to get the financing they need. Financial technology is filling gaps in the ecosystem, but we must collectively improve data connectedness, education, and supportive services for all SMBs in order to give them the opportunity to succeed.”

In this report, VSBs are defined as companies with 1 to 19 employees, small businesses (SBs) are defined as having 20 to 99 employees, and mid-sized businesses (MBs) are defined as having 100 to 500 employees.

Key findings include:

  • The smallest businesses are least likely to apply for a loan.
    • 27% of VSBs applied for loans within the last 12 months, compared to 41% of SBs and 61% of MBs
    • Only 6% of VSBs definitely plan to apply for a loan in the next 12 months, versus 19% of SBs and exactly 50% of MBs
  • The smallest businesses are least likely to secure a loan. The likelihood of getting approved and for the desired amount increases with company size.
    • 80% of MBs were approved for the financing they applied for and got the terms they wanted, compared to 69% of SBs and 68% of VSBs
  • Very small businesses are the least likely to look beyond the bank to access capital. Larger businesses are much more likely than smaller businesses to look at online marketplace, lending hub, or online lender instead of a bank.
    • VSBs were the least likely to look at an online lender (6%) versus 18% of SBs and 10% of MBs
    • Meanwhile, MBs were more likely to look at an online marketplace or lending hub: 28% compared to 18% of SBs and only 6% of VSBs

This survey was conducted online within the United States by Bredin on behalf of Nav between September 11 and October 1, 2020, among 500 principals of U.S. companies with 1 to 500 employees. See the full results here.

About Nav
Nav uses real business data to quickly match small businesses with the best loans and credit cards. The leading Business Financial Management app, Nav’s intelligent business financing solution powers insights and opportunities for daily financial decisions that fuel their success. Nav’s solution is also leveraged by other business service providers to enhance their customer experience. More about Nav is available at Nav.com.

Nav is a technology company building the leading financial health platform for small businesses. What started as a way for small business owners to easily find funding has become a destination for over 350,000 small businesses to get everything they need to understand the full picture of where their business stands, and how their business data can impact their business financial health profile.