Smallest Businesses Having Difficulty Obtaining New Lending

A number of studies have shown that it's been more difficult for small businesses to obtain financing from lenders in recent months, but this problem has been particularly troublesome for the independent companies with the least annual revenue.

Companies with less than $500,000 in annual revenues, which account for more than nine in every 10 small businesses nationwide, are having the hardest time obtaining the loans they may need to expand, according to the second quarter's Private Capital Access Index, from Dun and Bradstreet Credibility Corp. and Pepperdine University's Graziadio School of Business and Management. In all, 63 percent of these companies said that the issues they've had in obtaining this type of financing is consequently making it more difficult to grow.

"We need to do something to help our smallest businesses and there is no better time than during small business month," said Jeff Stibel, chairman and chief executive officer for Dun and Bradstreet Credibility Corp. "The results from this second quarter study show lack of financing consistently hinders growth at the smallest companies, which in turn restricts their ability to hire. These businesses need to access capital to fully stabilize the economy."

Moreover, many owners of these small businesses are now using their own money, and even dipping into their savings, to keep their enterprises afloat through these difficulties, the report said. In all, three-quarters of owners polled said that they'd moved personal funds into their companies as a means of financing things they wanted to accomplish. Moreover, 84 percent noted that if the current financing availability persists for much longer, it will affect their ability to expand their hiring efforts. Others say it might even lead to issues that could result in layoffs or entire companies shutting down.

Issues related to a lack of funding may wind up being extremely problematic for the vast majority of small business owners and as such they may need to look into other ways to free up capital to keep their companies afloat. This might include trying to reduce the costs they pay for small business insurance policies. For instance, those that are looking to expand hiring might consequently face higher workers' compensation insurance, and likewise, there could be more affordable general liability insurance options available to them that they may not know about.