Small business owners are feeling positive about the future and are getting ready to grow their companies, a new report says. According to the latest Main Street Pulse Report by OnDeck, a company that reports on the financial health of small and midsized businesses, nearly three-fourths (73 percent) of small business owners think that the economy is getting better. Acting on that confidence, one in five have added staff in the past six months, while two in five plan to do so over the next six months.
However, one hurdle that might be holding these business owners back is the lack of access to the capital they need to grow. Some 55 percent of entrepreneurs in the study say they had applied for financing in the past six months. However, of those who applied for capital, a whopping 82 percent were denied financing by their bank, and nearly two-thirds (64 percent) were unable to get any type of financing whatsoever.
The situation is so bad, it is discouraging small business owners from applying for financing altogether. Two-thirds of business owners who hadn’t applied for financing in the past six months say they chose not to because they believed banks would turn them down–not because they didn’t need capital. (Only 15 percent of all small businesses didn’t apply for capital and didn’t need it.) In fact, gaining access to capital from traditional lenders was the number-one challenge small businesses in the survey cited—ahead of “growing sales” and “navigating taxes.”
Small business owners aren’t looking for huge amounts—a factor that could actually be hindering their search for capital, as many banks are focused on lending larger amounts. The median borrowing need of businesses in the study was just $44,000.
Why are small businesses seeking financing? The majority (84 percent) of small business owners say they use funding for growth. Thirty-nine percent use it for working capital, 29 use it for expansion and facility upgrades, and 16 percent use it for inventory and equipment purchases.
“The majority of small business owners are optimistic about the economy, but have been stalled by traditional lenders,” said Noah Breslow, OnDeck CEO, in announcing the report.
However, the good news is that the entrepreneurs in the study aren’t letting the lack of financing keep them from seeking new customers. They’re actively employing word-of-mouth, natural search optimization tactics and email marketing as their top tactics to attract new customers and prospects. Whether they’ll have the capital in place to adequately serve those customers is another question.