These 3 Reasons Account for More Than Half of Business Loan Requests on LendingTree Platform
The most common reason for seeking a business loan on the LendingTree platform in 2023 was to start a business, according to an analysis of nearly 450,000 business loan requests from last year.
Nearly 1 in 5 (19.4%) business loan requests on our platform last year were for starting a new business. That’s up nearly one-third from 2022 and almost twice the percentage from 2020.
That growth pushed starting a business from the third most common reason for a business loan request — behind purchasing equipment and expanding a business — in recent years to being the single biggest reason in 2023. Dating to 2021, those three reasons have accounted for more than half of all business loan requests on the LendingTree platform.
In all, we reviewed more than 1.9 million business loan requests dating to 2020. Here’s what we found.
Key findings
- The most common reason for requesting a business loan on the LendingTree platform in 2023 was to start a business. This reason accounted for 19.4% of loan requests — up 32.0% from 2022 and nearly double the percentage from 2020. The next most common reasons in 2023 were equipment purchases (19.3%) and business expansion (15.9%). Equipment purchases were the most common reason in 2020, 2021 and 2022.
- The average loan amount requested for starting a business in 2023 was $135,626. That’s well below the average amount across all business loan requests — $149,620. The highest average requested amount in 2023 was for real estate purposes ($408,588), followed by buying a business ($341,743) and expanding one ($157,016). Starting a business was fourth.
- New Mexico (23.7%), Oklahoma (23.6%), and Wyoming, Arkansas and Kentucky (tied at 23.3%) have the highest percentage of loan requests for starting a business. Meanwhile, Maine (6.8%) and West Virginia and Vermont (both 6.5%) top the list for loan requests for real estate purposes.
- The industries that accounted for the highest percentage of requested loans for starting a business in 2023 were art, entertainment and recreation (28.6%), accommodation and food services (28.4%), and health care and social assistance (24.1%). Meanwhile, almost 1 in 3 (32.5%) loans requested for equipment purchases came from the transportation and warehousing industry. Lastly, the most common industry to request a loan for business expansion purposes was the scientific and technical services sector at 19.8%.
Most common reasons for requesting business loan: Starting business, purchasing equipment, expanding
There can be as many reasons for wanting a business loan as there are grains of sand on a beach. When someone requests a loan on the LendingTree platform, we offer 10-plus options and “other.”
In 2023, a higher rate of people requested a loan to start a business than for any other reason. It narrowly edged out equipment purchases (19.4% versus 19.3%) for the top spot, with business expansion coming in third at 15.9%. In the three previous years, purchasing equipment had been the biggest reason for requesting a business loan.
| Business loan purpose | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|
| Start a business | 19.4% | 14.7% | 16.2% | 9.8% |
| Equipment purchase | 19.3% | 21.4% | 20.9% | 18.0% |
| Expansion | 15.9% | 18.5% | 16.3% | 12.7% |
| Inventory | 8.6% | 8.7% | 9.2% | 8.9% |
| Purchase vehicle | 6.4% | 6.4% | 5.5% | 4.5% |
| Refinance debt | 5.5% | 4.5% | 3.6% | 4.8% |
| Other | 5.3% | 4.8% | 4.9% | 17.1% |
| Payroll | 4.7% | 6.3% | 8.5% | 7.7% |
| Real estate | 4.1% | 4.2% | 5.0% | 5.7% |
| Buy a business | 3.9% | 3.5% | 3.6% | 4.6% |
| Marketing | 3.0% | 3.0% | 2.8% | 2.6% |
| Remodel | 2.4% | 2.4% | 2.5% | 2.4% |
| Finance accounts receivable | 1.4% | 1.5% | 1.3% | 1.3% |
Source: LendingTree analysis of more than 1.9 million business loan requests on our platform from 2020 through 2023. Notes: The order is based on the top reasons for seeking a business loan in 2023. Totals don’t equal 100% due to rounding.
The top three reasons in 2023 have dominated the list recently, accounting for more than half of all requests dating to 2021. However, this is the first time starting a business has topped the list, albeit narrowly. It marks a remarkable shift, given that 18.0% of requests were for equipment purchases in 2020 and just 9.8% were for starting a business. Given the economic climate of 2020 — including spiking unemployment, government stimulus, reduced personal spending because of lockdowns and still-historically-low interest rates — perhaps it shouldn’t be too surprising. Many people didn’t want to dive into starting a new business in the economic chaos of that time, and those who did may have opted for smaller, side-hustle-type businesses for which they might not have needed a major loan.
The bottom end of the list has been pretty consistent over the years. The least common reasons for requesting a loan from 2021 to 2023 were financing accounts receivable, remodeling, marketing and buying a business. None of those reasons has accounted for more than 4.6% of overall requests dating to 2020.
Average amount requested for business loan ranged from $68,144 to $408,588 in 2023
It’s never been easier to start a business. Depending on your goal, you can start a small business in an afternoon with relatively little money. However, not all businesses are created equal. Many new businesses require big-time capital investments, sending people looking for a loan to help them.
Our analysis found that the average loan amount requested in 2023 to start a business was $135,626. That’s a lot of money and is significantly higher than the average sought to start a business in 2020 ($108,769). Still, it’s less than the average amount requested across all business loans in 2023 ($149,620) and just a fraction of the amounts requested for some other reasons.
| Business loan purpose | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|
| Real estate | $408,588 | $482,952 | $448,013 | $456,902 |
| Buy a business | $341,743 | $346,808 | $332,050 | $350,782 |
| Expansion | $157,016 | $160,901 | $137,919 | $173,234 |
| Start a business | $135,626 | $120,012 | $108,120 | $108,769 |
| Refinance debt | $132,792 | $141,897 | $153,766 | $279,758 |
| Remodel | $128,050 | $120,195 | $94,028 | $117,702 |
| Other | $123,095 | $119,241 | $243,465 | $309,165 |
| Finance accounts receivable | $118,190 | $130,950 | $122,993 | $135,848 |
| Payroll | $96,434 | $89,930 | $62,118 | $83,217 |
| Marketing | $81,879 | $93,353 | $67,608 | $117,611 |
| Inventory | $76,898 | $77,449 | $65,057 | $77,099 |
| Equipment purchase | $76,603 | $81,187 | $66,566 | $77,496 |
| Purchase vehicle | $68,144 | $92,097 | $58,300 | $98,402 |
| Average across all purposes | $149,620 | $158,229 | $150,769 | $183,537 |
Source: LendingTree analysis of more than 1.9 million business loan requests on our platform from 2020 through 2023. Note: The order is based on average requested business loan amounts in 2023.
The average amount requested is the lowest in the four years included in this report, and well below the $183,537 back in 2020. The requested amount from 2020 was at least $25,000 higher than any of the ensuing three years.
The highest requested amount in 2023 was for real estate purposes at $408,588. (This just in: Buying property is expensive!) Still, the amount requested is by far the lowest in the four years covered in this report and is down from a high of $482,952 in 2022. Buying a business ($341,743) had the second-biggest requested amount in 2023, though well below buying property. No other reason even amounted to 50% of the amount requested for buying a business, with business expansion coming the closest at $157,016, followed by starting a business.
While we highlighted national figures, here’s a chart looking at the states where people requested the largest business loans, across each business loan purpose:
| Rank | State | Start a business |
| 1 | Vermont | $202,758 |
| 2 | Hawaii | $197,798 |
| 3 | Wyoming | $192,578 |
| 4 | Maine | $189,845 |
| 5 | Idaho | $183,381 |
| Rank | State | Equipment purchase |
| 1 | Hawaii | $125,852 |
| 2 | Utah | $118,438 |
| 3 | District of Columbia | $106,744 |
| 4 | Alaska | $104,254 |
| 5 | North Dakota | $101,006 |
| Rank | State | Expansion |
| 1 | Texas | $255,608 |
| 2 | Nevada | $238,463 |
| 3 | South Dakota | $232,141 |
| 4 | Delaware | $216,200 |
| 5 | District of Columbia | $206,605 |
| Rank | State | Inventory |
| 1 | Utah | $119,641 |
| 2 | California | $104,776 |
| 3 | Minnesota | $102,703 |
| 4 | Oregon | $100,848 |
| 5 | New York | $100,207 |
| Rank | State | Purchase vehicle |
| 1 | Wyoming | $156,573 |
| 2 | Hawaii | $119,670 |
| 3 | Alaska | $110,846 |
| 4 | Nevada | $104,954 |
| 5 | New York | $92,609 |
| Rank | State | Refinance debt |
| 1 | New Mexico | $263,229 |
| 2 | Alaska | $228,110 |
| 3 | District of Columbia | $207,326 |
| 4 | Utah | $177,477 |
| 5 | Idaho | $176,000 |
| Rank | State | Other |
| 1 | Wyoming | $268,984 |
| 2 | Hawaii | $213,682 |
| 3 | Alaska | $196,214 |
| 4 | Utah | $190,414 |
| 5 | Montana | $188,828 |
| Rank | State | Payroll |
| 1 | Alaska | $181,333 |
| 2 | Georgia | $165,548 |
| 3 | Montana | $157,551 |
| 4 | Hawaii | $151,556 |
| 5 | West Virginia | $145,818 |
| Rank | State | Real estate |
| 1 | Hawaii | $653,939 |
| 2 | Nevada | $612,813 |
| 3 | Utah | $611,136 |
| 4 | Montana | $557,703 |
| 5 | Colorado | $549,256 |
| Rank | State | Buy a business |
| 1 | Montana | $533,235 |
| 2 | Wyoming | $507,129 |
| 3 | Nevada | $501,552 |
| 4 | Vermont | $491,250 |
| 5 | North Dakota | $424,216 |
| Rank | State | Marketing |
| 1 | Kansas | $225,966 |
| 2 | District of Columbia | $186,950 |
| 3 | Hawaii | $161,263 |
| 4 | Iowa | $148,378 |
| 5 | Kentucky | $130,253 |
| Rank | State | Remodel |
| 1 | Georgia | $287,607 |
| 2 | District of Columbia | $242,500 |
| 3 | New Jersey | $168,599 |
| 4 | Maine | $167,000 |
| 5 | Colorado | $162,383 |
| Rank | State | Finance accounts receivable |
| 1 | Rhode Island | $471,786 |
| 2 | District of Columbia | $371,905 |
| 3 | Wyoming | $315,833 |
| 4 | Idaho | $226,786 |
| 5 | Maine | $190,000 |
Source: LendingTree analysis of nearly 450,000 business loan requests on our platform in 2023. Note: The order is based on the top reasons for seeking a business loan in 2023.
New Mexico residents most likely to request business loans to start business
Our analysis showed significant variations by state among the reasons for requesting a business loan in 2023.
- Highest and lowest percentage of requests for a loan to start a business: New Mexico (23.7% of business loans sought by New Mexico residents were for this reason), Rhode Island (15.1%)
- Highest and lowest percentage of requests for a loan to purchase equipment: Mississippi (26.6%), District of Columbia (14.9%)
- Highest and lowest percentage of requests for a loan to expand a business: Florida (19.5%), Arkansas (10.9%)
- Highest and lowest percentage of requests for a loan to buy real estate: Maine (6.8%), Mississippi (2.9%)
- Highest and lowest percentage of requests for a loan to purchase a vehicle: Massachusetts (7.5%), Alaska (4.3%)
As for loan requests for starting a business, Oklahoma (23.6%) and Wyoming, Arkansas and Kentucky (tied at 23.3%) are just behind New Mexico with the highest percentages. On the other end, Rhode Island is followed closely by other Northeastern states — New Jersey (15.8%), Massachusetts (15.9%) and Connecticut (16.3%).
For loans for real estate purposes, West Virginia and Vermont (both 6.5%) are just behind Maine at the top of the list, while Arkansas, Georgia and Louisiana (all at 3.2%) follow Mississippi near the bottom.
The reasons industries are seeking business loans
When an applicant is seeking a business loan through LendingTree, we ask them to tell us their industry, providing a range of choices. Perhaps not surprisingly, the results varied tremendously by industry in 2023. After all, the costs associated with different types of businesses can be as different as the businesses themselves.
For example, the top three industries that requested the highest percentage of loans for starting a business were:
- Art, entertainment and recreation (28.6%)
- Accommodation and food services (28.4%)
- Health care and social assistance (24.1%)
However, the transportation and warehousing industry was most likely to request a loan for equipment purchases (32.5%) and buying a vehicle (15.6%, more than six percentage points higher than any other industry), the retail trade industry was most likely to request a loan for inventory purposes (28.5%, almost 12 percentage points higher than any other industry) and the professional scientific and technical services sector was the most likely to request a loan for business expansion (19.8%).
Among the industries least likely to request loans for various reasons: Only 0.8% of loans requested among the transportation and warehousing industry were for marketing and 0.6% were for remodeling. Meanwhile, only 4.9% of loans in the real estate, rental and leasing space were for equipment purchases.
The big takeaway: Shop around
For most small businesses, every dollar matters. That’s true regardless of who you are, where you live or what type of business you run or plan to start. Profit margins are slim, and your financial wiggle room is, too. That makes it essential that you take the time to compare different loan offers from different lenders.
Of course, there are plenty of other financing options beyond the bank. Small Business Administration (SBA) loans can be a great alternative for those who qualify, as can government grants. In 2023, the average SBA 7(a) loan was $479,685, while the average was $1,083,622 for a 504 loan.
Credit unions are worth considering as well. And depending on the size of your needs, crowdfunding could even be a consideration.
Finally, it’s important to understand your needs — and your limitations — as you seek a loan. New funding can be like rocket fuel for a business, but taking on too much debt can be damaging. Remember: Just because someone is willing to lend you a lot of money doesn’t mean you have to take it or can afford it. Do your homework and run the numbers on how big a loan you need and under what terms you can pay it off. Then, you can find a loan that matches your needs.
Methodology
LendingTree researchers analyzed nearly 450,000 business loan requests on the LendingTree platform from Jan. 1 to Dec. 31, 2023. We also analyzed close to 1.5 million business loan requests from Jan. 1, 2020, through Dec. 31, 2022 — or more than 1.9 million across the four years.
These business loan requests include both successful and unsuccessful applications.
We analyzed states and industries by loan purpose percentages. We also analyzed states by their average requested loan amounts.