Average Small Business Debt: The State of Small Business Debt Statistics

Small businesses can have debt too. It’s one of the most common problems we see small businesses facing. Small business debt can be a huge challenge if you’re not prepared.

According to the Federal Reserve recent reports, small business debt is on the rise as there is a 9.1% increase in the amount of debt being taken by businesses compared to 2020. That is approximately $425B dollars debt added. 

The Small Business Administration (SBA) published a study that showed that small business owners hold $17.7 trillion in debt.

Let’s unpack those small business debt statistics and have a closer look at the numbers and how they can help business.

Average Small Business Debt

The average small business debt is around $195,000 according to the published data from FundingCricle, Business.com, C2FO, Zippia, Nerdwallet, and Experian.

Average Small Business Debt

While the debt burden can be daunting, there are ways to manage and pay down small business debt.

One way is to focus on increasing cash flow and working towards getting your business into a positive cash flow position. You can also look into refinancing options or using credit card consolidation loans to reduce your monthly payments.

Whatever you do, don’t ignore the issue – take action today to get your debt under control!

What is a good debt ratio for a small business?

A debt ratio of 1 to 1.5 is a good rule of thumb for small businesses according to the British Business Bank. This means that for every $1 of debt, the company has $1.50 in assets to cover it.

Keep in mind that this ratio is just a general guideline and may not be appropriate for all businesses. For example, a company with significant assets in liquid form (such as cash or investments) may be able to carry more debt than a company with few liquid assets.

Also, companies that are expanding rapidly may want to have a higher debt ratio so they can take advantage of favorable financing terms.

Key Finding on Small Business Debt Statistics

  • 70% of small businesses have outstanding debt.[4]
  • Fed’s financial stability study show small business debt at $17.7 trillion in 2022.[3]
  • Experian found that the average US small business owner owes $195,000 in debt.[1]
  • 32% of business owners applied for a loan in order to refinance or pay down debt in 2020, compared to 30% in 2019.[2]
  • 79 % of employer firms have debt, up from 71 % in 2019..[2]
  • The amount of debt firms hold also increased; the share of firms with more than $100,000 in debt rose from 31% in 2019 to 44% in 2020.[2]
  • 50% of firms took out debt to address their financial challenges. [2]
  • 36% firms did apply for loan because of the amount of debt they currently have.[2]

On this page, you will find:

How Many Small Business Have Debt

According to a research conducted by the Small Business Administration, 70% of small business owners had outstanding debt, excluding mortgages.

In accordance with a research conducted by the American Express Open Small Business Monitor, small business owners are overextending themselves in terms of credit card debt.

Small Business Total Debt

Small Business Total Debt

This amounts to a significant increase from the $15.4 trillion in debt that small businesses owed in 2013. To begin with, it’s vital to understand what constitutes a “small business” before we get too concerned about it. According to the Small Business Administration, small firms are defined as those that employ fewer than 500 employees. 

So small businesses with 50 or fewer employees are considerably more likely to exist than large corporations. As a result, the vast majority of firms that are now in existence in the United States are not large enough to have attracted significant public attention as a result of their total outstanding debt.

Small Business Debt Refinance

Small Business Debt Refinance

As the year draws to a close, it’s interesting to reflect on recent small business funding trends. Small company owners seem to be prioritizing debt reduction and refinancing more than ever. To better position their companies for future expansion, and to maintain financial discipline.

Debt Outstanding

Debt Outstanding

In 2021, 79 percent of employer firms will have debt, up from 71 percent in 2016. 54% of employer firms say they started with debt. Among those organizations, around two-thirds report that obtaining debt was simple (reflecting the relatively low interest rates that have prevailed during this period of economic expansion).

Small Business Debt Increase

Simply put, it is undeniable that small business debt has risen in recent years, particularly among entrepreneurs. 

Because of historically low interest rates and readily available credit, as well as an overall growth in the number of businesses, this is expected to be the case in the near future. It should also be of some concern to you if you own a small business, as it should be to most people. 

It is possible that serious implications will follow when an industry has such rapid debt increase. As we’ve already witnessed the consequences of the housing bubble’s burst in 2008, it’s probable that another crisis is on the horizon at this point in history. It will be necessary to wait and observe what happens the following time.

Took Debt to Address the Financial Challenge

Faced with a difficult situation, many small businesses turn to debt as a way to address their financial issues. The previously mentioned statistics show that many firms that turn to debt for help continue to struggle ten years later. 

Since taking out debt can be dangerous, it is important for business owners to educate themselves on the risks and responsibilities of debt so that small business goals can be achieved and negative implications can be prevented.

Firm didn’t apply for Loan

According to the Biz2Credit 2014 Small Business Lending Survey, only 34% of small businesses apply for a business loan every year. A startling finding is that 36% of respondents said they would not apply for a business loan because of existing debt levels. 

For many companies, existing loans are hindering the chance of securing future credit. Businesses that are able to grow with loans see steady, year over year growth while businesses in debt shrink. The lesson is to tuck away an emergency reserve and prepare for any possible setbacks that may arise, but also be willing to seek out financing if your business requires it.

Final Thoughts

Small business debt is a significant problem. According to our research, small-business debt in the United States is increasing.

If you own a small business, debt is almost surely something that will cross your thoughts at some point. Debt is one of the most difficult problems that small businesses are currently facing.

The fact that all small businesses are in debt, whether it is due to their starting capital or loans taken out to expand their operations.

If you aren’t prepared, it can be a huge task, but taking charge of your finances and learning to manage your costs is vitally necessary. Your company should be able to limit risk while simultaneously increasing revenue with proper planning and management.

It’s a good idea to figure out how much money you owe and to whom so you know how to handle the situation. You don’t want any unpleasant surprises in the road, and accumulating small business debt could be harmful.


How much debt is OK for a small business?

When considering how much debt is acceptable for your small business, there are numerous elements to consider. Generally speaking, you should not take on more debt than you can comfortably pay off within five years of taking out the loan.

According to the Funding Circle, you can often borrow up to 30% of your company’s total capital in most cases.

If your company needs further time to produce a profit, this phase will be quite uncomfortable, but it may still be tolerable if you keep a close eye on your spending and eliminate any superfluous expenditures.

Is debt bad for a business?

While debt is not an issue in and of itself, business owners must exercise caution when it comes to taking on excessive amounts of debt. If a firm is profitable, the presence of some debt may serve to increase the legitimacy of the organization. 

If, on the other hand, the firm is experiencing financial difficulties, the presence of debt will make it more difficult to recover because the company will be required to pay off its debts before it can do much else.

Can you sell a business that is in debt?

It is possible to sell a small firm with debt, but many factors must be considered. While you should counsel an attorney about your individual circumstances, consider the following: What type of debt is owed, who the creditors are and whether they intend to continue receiving payments, whether your state allows small business debt consolidation through an LLC or corporation, and whether there are additional assets that could help pay off the obligations.

Can you sell a business that is not profitable?

In the correct circumstances, it may be possible. A company that is losing money may not be worth much, but there are ways to boost its value.

 It all relies on where your company is in its lifetime and how profitable it is. Then there’s the subject of selling the company.

What is small business debt collections

Generally speaking, small business debt collection is the procedure by which a firm collects debts ranging from one to four thousand dollars that are due to them by customers.

Collection companies are often responsible for the process of collecting small business debt, while contractors and other business entities may also be involved in the process.


1. Experian


3.Fed’s Financial Stability Report

4.FedSmallBusiness Reports

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