Small Businesses Have Better Access to Capital

One of the biggest impediments that many small business owners have cited as a reason they have not been able to grow in recent years is that many financial institutions are keeping their credit restrictions tight. However, that issue seems to be abating at least somewhat these days, thanks to private capital stepping up the funding instead.

Small businesses are now starting to report that they have increased access to capital overall, but a lot of it is coming from private sources, rather than traditional lenders, according to the latest Pepperdine Private Capital Access and Private Capital Demand Index from Pepperdine University’s Graziadio School of Business and Management and Dun and Bradstreet Credibility Corp. For the fiscal second quarter of the year, access to private capital increased 2.3 percent from the previous period, but at the same time, demand for that kind of funding actually slipped 3.7 percent.

Meanwhile, 58.4 percent of companies that said they tried to get financing attempted to do so by seeking a bank loan, the report said. Of that number, 54 percent were actually approved for the requests

What else happened?
Even as access to capital and many companies may be starting to feel better about their chances for ongoing success, nearly half (48 percent) said that they thought the current environment overall was restricting their chances to grow their firms, the report said. Moreover, another 41 percent of those polled said that they thought these same conditions were making it more difficult for them to hire new workers.

Interestingly, for businesses that sought financing and said they were satisfied with the end result (in terms of pricing and contract terms), those that did so through crowdfunding, friends, family, grants, and bank loans, the report said. Meanwhile, there was less satisfaction with the terms of deals overall for funding raised through private equity groups, hedge funds, and so on. In addition, 56 percent of companies that were not able to find funding during the quarter still thought the way they went about doing so worked well for their firms.

Owners who want to best position their companies to move their companies forward in this way might want to start by putting their own finances in order first. That could include cutting costs for things like small business insurance – including liability insurance coverage – which in turn could save them thousands of dollars per year.

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