Information Technology (IT) firms received the most funding of any industry in terms of volume, the highest average amount of funding, and had the highest average revenue, according to a new study of primary financial data by Biz2Credit. The study also found that demand for IT services increased during the pandemic, leading to improved financial performance and that the owners of IT businesses had the highest average credit score.
Accommodation and Food businesses saw the highest average approval rates for financing requests. This accounted for the second largest percentage of the funding given to small businesses. These businesses suffered greatly during the pandemic and were able to take advantage of funding programs like the Paycheck Protection Program (PPP) that were set up to help them. The Accommodation and Food industry finished second in terms of total funding volume
The Biz2Credit 2021 Top Small Business Industries Report analyzed the financial performance of over 200,000 companies that used the company’s online funding platform to apply for funding, including forgivable loans through the SBA’s Paycheck Protection Program (PPP), in 2020-21. The analysis examined the following metrics: Annual Revenue, Operating Expenses, Loan Approval Rates, Total Funded Amounts, Business Owners’ Credit Scores, and Age of Business.
· The sector with the highest total volume of funding in 2020 was the Information Technology (IT) industry, which secured 18% of all funding issued. The next highest funded industries across the country were Accommodation and Food Services (15.3% of funding volume) and Health Care and Social Assistance (8.2% of funding volume)
· IT business owners had the highest average credit score (636), followed by Real Estate (633), Finance and Insurance (624), Professional and Technical (623), and Health Care (619).
· Businesses in the IT sector had the highest average revenue ($1,518,640). Next were Wholesale Trade ($1.3 million), Manufacturing ($1.1 million), Retail Trade ($750K), Accommodation and Food Services ($626K), and Health Care and Social Assistance ($612K).
· Accommodation and Food Services had the highest approval rate for financing applications at 57%. Close behind were Retail Trade (55%) and Health Care (54%), while Transportation and Warehousing was the industry with the youngest businesses. This corresponds to the highest number of recent startups.
· Health Care and Social Assistance had the oldest businesses with an average age of 91 months (7.6 years).
More findings revealed a Certified Professional Accountant (CPA) a Certified Professional Accountant (CPA) firms proved valuable for small business owners during pandemic. The report also analyzed how frequently businesses in different industries worked with a CPA for financing applications. It examined the data of more than 40,000 small businesses that partnered with CPA firms to process and fund more than $1 billion in PPP loans through the CPA Business Funding Portal. The cloud-based financing platform was developed by Biz2Credit and CPA.com specifically for accounting firms and recently added a term loan option to support CPA firms’ expanding role in business advisory services.
Data from the platform was analyzed as part of the Biz2Credit report. The top five industries working with CPA firms are Accommodation and Food Services (17.8%), Construction (13.6%), Health Care (13.3%), Professional Services (12.0%) and Other Services (9.5%), which includes beauty salons, repair shops, laundry services and a range of other services.
We know from our experience with small business relief efforts during the pandemic that CPAs provide a critical bridge in securing funding for many business owners. Getting CPA firms streamlined access to financing for their clients will have beneficial effects going forward, but particularly so for industries faring less well as the recovery gains strength.
The report covers industries based on the NAICS classification system, including Accommodation and Food Service, Business and Professional Services, Healthcare, IT, Manufacturing, Personal Services, Retail Trade, and Wholesale Trade.
The study sought to identify the top industries for small businesses during the preceding year and to measure the performance of businesses based on their industry affiliation. All companies included in the survey had less than 250 employees and less than $10 million in annual revenues. The report covered small businesses across the country, from start-ups to established companies. Biz2Credit also analyzed lending data from the Paycheck Protection Program (PPP) from the SBA’s database.