As the age of a small business owner increases, so do their chances of having a loan application approved by bank lenders, according to research from Biz2Credit. While that’s maybe not so hard to believe, what is interesting is that neither the youngest nor the oldest of small business owners appear most eager to borrow.
Instead, Biz2Credit said, small business owners aged 30 to 39 hold the highest portion of small business loan applications, accounting for nearly a third. New research from Biz2Credit, released Thursday (June 1), found that this age range only gets approved 16 percent of the time.
“The older applicants had the longest established companies in age of business (51 months), which is more than four years,” explained Biz2Credit CEO Rohit Arora in a statement. “Since banks typically want to see at least three years of financal data when making funding decisions, our study confirms that established businesses with higher annual revenues are more likely to be approved for loans than newer companies owned by younger applicants.”
It’s perhaps unsurprising, then, that entrepreneurs aged 20 to 29 see a loan approval rate of just 9 percent. Meanwhile, entrepreneurs over the age of 60 enjoy an approval rate of 26 percent.
Biz2Credit also uncovered obvious patterns between age and other metrics. For instance, as business owners age, their operating expenses increase, as do their personal credit scores.
“Applicant age, annual revenues, time in business, and creditworthiness increase over time, according to our study,” Arora said. “Can younger entrepreneurs find funding? Yes, but they are more likely to get that funding from non-bank lenders that charge higher interest rates. They must strive to maintain solid credit scores and solid performance over time in order to get access to capital at better rates and terms.”
Interestingly, Arora noted that that could indicate that lenders and the media are too focused on Millennials when the industry is seeing significant business from middle-aged entrepreneurs.
“No one is writing about it because it’s not sexy, but the reality is that there is a lot of opportunity in small business lending with older borrowers,” Arora added. “The media focus on Millennials as if there is no other growth group. Current entrepreneurs matter.”