12 Sep Alternative Sources of Capital for Small Businesses
Obtaining financing for many small business owners can be an intimidating and overwhelming endeavor. In fact, numerous small business owners do not even attempt to seek outside debt capital for their business for fear of failure. Enclosed are some statistics that bolster the aforementioned premise:
* Only 43% of all small businesses in the U.S. applied for a commercial loan last year.
* Only 38% of all small businesses in the U.S. obtained a commercial loan for expansion purposes last year
* 52% of all small businesses in the U.S. do not have any short or long term commercial financing on their balance sheets
* Only 1 out of every 5 small businesses in the U.S. qualifies for a conventional bank loan
* 1 out of every 3 small businesses in the U.S. fail due to not maintaining sufficient capital
* Only 13% of small businesses in the U.S. qualify for a conventional loan from a large regional or national footprint bank
Despite the negative inertia for many small businesses to seek outside debt financing to fund their business operations, private debt lenders have continued to increase their market share in the small business and/or small balance loan space. Due to streamlined loan underwriting and minimal “bureaucracy” that enable small businesses to have quick access to debt capital, private lenders continue to acquire market share from banks in the aforementioned marketplace.
Although borrowing from a private lender has become more commonplace during the last several years for small businesses, numerous small businesses in the U.S. lack familiarity with the private lending marketplace. The following statistics lend credence to the previously mentioned premise:
* Only 32% of small businesses in the U.S. applied for a commercial loan from a private lender last year
* The average size of a small business commercial loan from a private lender in the U.S. last year was only $65,000 as opposed to $633,000 last year from conventional commercial lenders.
As interest rates continue to increase during 2022 and as commercial banks continue to tighten their loan underwriting standards to combat a softening economy in the U.S., I expect private lenders to continue to increase both their loan volume and market share in the immediate future as more small businesses in the U.S.seek to access debt capital from the private lending marketplace.
Worth Avenue Capital specializes in arranging debt financing for both small businesses and real estate developers/investors and also handles bank workouts for those same clients. You can learn more about WAC by taking a look at the website and Youtube videos or by contacting WAC’s principal, Michael M. Ciaburri at worthavenuecapital@gmail.com or (203) 605-4082. WAC maintains offices in both Guilford and Greenwich, Connecticut as well as Palm Beach, Florida. Be sure to follow @worthavecapital on Twitter for the latest lending news.