By Rieva Lesonsky
It’s never been easy for small businesses and startups to get small business loans, even when the economy was going gangbusters. Now, however, five years after the financial crisis that precipitated the Great Recession, small business owners say they’re still facing huge hurdles getting the financing they need to expand their businesses.
So says a new study by alternative financing company Merchant Cash and Capital (MCC). Here’s some of what the MCC Small Business Finance Survey reports:
- Before the economic crisis, just 6 percent of small businesses surveyed said business financing was hard to find. Today, however, half of respondents say it was hard to find financing between 2008 and 2012.
- What’s more, nearly seven in 10 respondents (69 percent) say traditional financing hasn’t returned to 2007 levels, and 86 percent expect the difficulty in securing financing to continue.
- As a result of their struggles to obtain bank loans, four in 10 small business owners surveyed say they have investigated or used alternative methods to finance their business. Fifteen percent have financed their businesses with credit cards, while 9 percent have asked their friends and family for money.
The difficulty obtaining financing is leading to stagnation for small businesses in the survey. More than half of respondents (54 percent) say they don’t plan to hire employees in 2014. Even those entrepreneurs who do obtain financing are more likely to use it simply to stay afloat, rather than to grow. Before the economic collapse, 32 percent say they used financing to grow their businesses; today, just 22 percent use it for that purpose. Instead, 40 percent of business owners are turning to financing just to pay the bills and keep their businesses going, up from 31 percent who used financing for this purpose pre-recession.
Is your small business struggling to find financing—or have you given up? While bootstrapping your business and operating without debt isn’t a bad thing, if lack of financing keeps you from taking advantage of opportunities to grow, that is a bad thing.
If you need working capital, a line of credit or a loan to help you fill a large order, expand into new markets or serve a new customer, don’t give up. Talk to your banker, and if they don’t have solutions for you, visit the experts at your local SCORE office or Small Business Development Center (SBDC). Both SCORE and the SBDC are clients of my business, and through speaking to their clients, I’ve seen how they’ve helped small business owners get the financing they never thought they could obtain.