Lendio Study Finds Midwest States Lag Rest of U.S. in Small Business Funding

The report shows small business owners in the region face the largest financing gap in the nation.

SILICON SLOPES, Utah — February 20, 2020 — Lendio, the nation’s largest marketplace for business loans, today released a new report on the state of small business lending in the Midwest. According to the report, small businesses in the Midwest are the most underserved in the nation despite seeing the highest level of growth in funding in Q4 2019. The findings are based on data from over 35,000 small business borrowers across the U.S. in 2019.

The Midwest states—Illinois, Indiana, Iowa, Kansas, Michigan, Missouri, Minnesota, Nebraska, North Dakota, Ohio and South Dakota—make up 20.8% of the national population. Yet these states only receive 15.7% of the total small business loan volume. Only three states in the region have a positive proportion of funding to population ratio. The South Central region is the only other region in the country to see a negative disproportion, but only by 2.7%.

The lag in funding in the state could be attributed to the region’s lower-than-average credit scores and reported revenues as well as its higher-than-average number of derogatory credit marks. In 2019, small businesses in the Midwest had the lowest average credit score in the nation at 662, which is five points lower than the national average.

Key findings from the report show that in Q4 2019:

• The number of businesses getting funding in the Midwest increased by nearly 30%, the highest increase nationwide.
• The average annual revenue for small businesses in the Midwest came in at $627,714, much lower than the national average of $807,407. Iowa, Michigan, Minnesota, Nebraska, South Dakota and Wisconsin all reported declines in business revenue. 
• The Midwest was the only region to see a decrease in personal income growth. Michigan, Minnesota, South Dakota and Wisconsin all reported decreases in personal income.
• The region as a whole had the highest percentage of female borrowers in the nation.

Wendy Eaton, a Lendio franchise owner in Kansas City, knows firsthand how hard it can be for local business owners in the region. “Sometimes we are not able to get a business the funding they are looking for because they lack business credit, or we can’t verify revenue for a long enough period of time,” says Eaton. “Working with those clients to help them become fundable is key. Taking them from non-fundable to a position of being able to obtain a loan so they can grow their business is incredibly rewarding.”

“When it comes to lending, the Midwest’s business owners are among the most overlooked in the nation,” says Brock Blake, CEO and founder of Lendio. “While multi-national corporations may dominate coastal metro areas, it is Main Street businesses in the heartland and around the country that fuel the American economy. As online lending and marketplaces like Lendio continue to expand, so too will the ability of Midwest business owners to access capital to grow and support their businesses.”