Capital Wanted, But Only From Preferred Sources

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September 19, 2013

By Charles H. Green

bankThe Coleman Report recently highlighted some of the results of Pepperdine University’s quarterly economic survey, the ‘Private Capital Access Index’ (PCA) that measures the demand for and access to private capital by business owners.

In the 2nd quarter PCA Index, smaller companies attempting to find funding most often targeted banks, reported 59% of the respondents. Next highest responses were business credit cards (57.2%) and personal credit cards (49.9%), which are both also primarily funded by banks. Less than one-half the respondents sought out personal loans (48.4%) or assistance from ‘friends and family’ (44.2%).

But the success among these respondents was found to be in the opposite order. Most often funding was provided by ‘friends and family’ (71%), followed by personal credit cards (58%), trade credit (57%) and business credit cards (54%). Bank loans trailed far behind at a miserable 27%.

Despite this reality, 63% of survey respondents still think their likely source of business financing will be a bank, although 67.7% of them expect it will be difficult to raise debt financing in the next six months.

Small-business insurance provider Hiscox’s latest ‘DNA of an Entrepreneur’ reports that 95% of respondents to a survey of 500 business owners say getting funding for a new business isn’t easy.

But despite the tight lending conditions, these small-business owners say they aren’t looking for alternatives to traditional loans and funding options.

While sites like Kickstarter, Indiegogo and Crowdfunder have made crowdfunding a household term, the majority of business owners surveyed say they haven’t considered this route for funding. Ninety-two percent of men and 94% of women say that for them, alternative funding options are not on the table.

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