New companies have nearly doubled Small Business Administration borrowing since 2020

giggsy25 // Shutterstock The first two years can make or break a business. About 75% to 85% of companies typically make it through their first year. If they succeed for that long, their survival rates tend to rise with each passing year. As startups ramp up operations and start building a customer base, funding is one of the largest factors determining whether they remain afloat. The Census Bureau’s Annual Business Survey data shows about 11% of small businesses that requested credit in 2020–not including COVID-19-pandemic-specific programs–were denied. And about 1 in 4 received some, but not all, of the credit they requested. Early-stage companies are most acutely at the mercy of venture capital market changes. Commercial lending for small, young companies is complex and often poses higher credit risks that some commercial banks may not be willing to take on. The Small Business Administration backs certain loans for small companies and startups to alleviate that risk. While SBA programs don’t guarantee individual small businesses will receive loans, they do expand the options. SBA’s 7(a) loan program is its most popular, providing up to $5 million each to applicants for real estate, working capital, supplies, ownership changes, and other company costs. The agency lent a record $44.8 billion to small businesses through traditional loans in the fiscal year 2021, including $36.5 billion in 7(a) loans. Lending slowed since then. So far, in the fiscal year 2023, which began in October 2022, SBA has approved about $11.5 billion for small businesses through the 7(a) program. Over half of those dollars tend to go to businesses that have been established for more than two years or those changing ownership. But companies in their early days have been growing their share of the pie in recent years, striving to be among the ones that survive. Using information from the Small Business Administration 7(a) lending data, altLINE took a closer look at lending to startups and young companies since 2019. Small Business Administration-backed loans grew rapidly in 2021