In June 2016, Babson College in association with Goldman Sachs published a report, The State of Small Business in America 2016. As part of this report, they surveyed nearly 1900 small business owners throughout the United States.
The phrase “small business is the backbone of the US economy” is bandied about so often that small business owners are probably fed up of hearing it – but that doesn’t make it any less true. Small businesses (defined as those with fewer than 500 employees) make up more than 99% of all companies in the US and, according to the SBA, account for more than 60% of new private sector jobs.
So it is worrying to read in the report that obtaining capital is still a challenge for this vital sector of the economy. Despite outdated and inefficient underwriting processes, traditional financial institutions (banks and credit unions) are still the principal source of funding for small business. But banks rarely give business owners the full amount of money that they ask for: on average, just 65% of the requested amount.
Business credit cards are frequently tapped for smaller amounts: the application and approval process is usually quicker, and businesses generally get a higher percentage of money they request, maybe because the amount is smaller.
Online lenders, such as SnapCap, normally offer bigger amounts than are available on credit cards. Online lenders are also more generous with approval amounts than banks: up to 80% of requested amounts, according to the survey. Despite this, and the ease of the application process, online lenders are still a small part of the overall funding picture – only 13% of businesses in the survey applied to companies like ours.
The survey asked business owners what would make it easier for them to access credit or loans. The three most common answers were: more flexible terms from their lenders, smaller minimum loan sizes and less paperwork.
Let’s check those against what we at SnapCap offer:
- Flexible terms: Yes! We can offer you financing from between 3 and 24 months. In some cases, you may be able to pay down your loan early and receive some interest write-down.
- Smaller minimum loans: Yes! Our minimum financing size is just $5,000.
- Less paperwork: Absolutely! We can have your loan or MCA funded within 24 hours of applying, normally without any need for paper documents.