According to a Pepperdine University survey of 559 businesses and 1,430 lenders and investors, small businesses inability to get loans hinders their growth and hiring. Only 40% of the business owners surveyed said they had the resources to grow, while an overwhelming majority of them said they had plans to grow, but lacked the capital to do so. The survey serves as additional evidence of the growing concern over the accessibility of loans for small businesses. “It’s inhibiting growth opportunities,” notes John Paglia, a finance professor at the university’s Graziadio School of Business and Management. He adds that despite lending frustrations, the data revealed business owners are more optimistic than conditions warrant. His concern is that this optimism will lead owners to take too much risk. The survey results for banks and investors showed that they rejected 90% of loans and investments that would be secured by real estate owned by the business. They also turned down 73% of loan requests that would be based on the cash flow of the business. Over half of the business owners surveyed said they relied on family and friends for money. Roughly one third secured bank loans and 10% utilized alternative lending options, such as loans against the company’s assets.
Many businesses want to expand but lack resources, study finds
Published: July 29, 2010Posted in: Articles
My name is Chinwe Onyeagoro and I am the editor of New Equity Daily. Five years ago I started a small business called O-H Community Partners in Chicago and one of the lessons I’ve learned is it’s not enough to simply concentrate on producing a good product or providing quality service or offer the best price. There’s an extra component that is crucial to the survival and growth of our businesses: funding and financing whether we are starting up or trying to maintain our operations or planning to grow. Without adequate funding, small businesses like ours run the risk of stagnating, or even closing. Financing is out there. It’s available. It’s just harder to find.