NEW YORK, July 26, 2018 /PRNewswire/ — The Firmament Group (“Firmament”), a leading provider of tailored debt and equity capital solutions to small- and medium-sized enterprises (SMEs), released today The Capital Access Challenge report that examined the financial trends and difficulties facing thousands of small business leaders across America. The study found that half of small business owners have been denied access to capital in the past year. The crisis is so acute that 51% worry about access to capital at least once per week and 41% say the lack of access to needed capital has kept them up at night in the last month.
The survey was conducted jointly by Firmament and The Center for Generational Kinetics, the leading research, speaking, and, solutions firm focused on solving cross-generation challenges.
The research also looked at the top reasons small businesses are seeking capital, and decision makers generally agreed that expanding their business was the primary motivator. 29% of respondents said they would make operational upgrades, 24% would build and develop the company’s staff, and another 24% would use the capital to meet new market opportunities.
However, the access to this capital remains elusive for many entrepreneurs. The primary obstacles to obtaining more credit include financial risk according to 37% of business owners, while the inability to establish favorable terms is the biggest hurdle for another 30%, affecting Baby Boomers (39%) more than Millennials (26%).
Another notable challenge facing these small businesses is that 46% say current lenders will not loan any additional capital. Even if all of these obstacles were surmountable, almost a quarter of business owners (24%) say they do not know where to go for additional capital.
These challenges are impacting small businesses of all sizes. The survey found that 43% of decision makers at small businesses with annual revenues between $5.0 million and $9.9 million are concerned about having access to capital compared to 51% of decision makers at small businesses with annual revenues between $80.0 million and $99.9 million.
“Our report finds some very troubling trends impacting not only small- and medium- sized businesses, but the national economy as a whole. Companies with a healthy financial record and strong future prospects should not have any problems finding flexible growth capital solutions, yet this seems to be a massively underserved portion of the market,” said Christopher Smith and Franklin McLarty, co-founders and co-presidents of Firmament. “Most troubling is that many small business owners, regardless of their age and experience, don’t even know where to look for a creative capital solution.”
“We find it interesting that different age groups are looking for capital from different sources, reflecting some broader generational assumptions Baby Boomers and Millennials have when it comes to business growth,” said Jason Dorsey, president of The Center for Generational Kinetics. “Millennials are more open to using a less traditional route to access capital, but that may not actually open the right doors to help grow their business.”
When accessing capital, the study found that half of small business decision makers think of contacting a bank first when seeking access to capital to grow their business. While 59% of Baby Boomers would go to a traditional bank initially, Millennials exhibit the least comfort with banks as a source of capital, instead turning to credit unions, private equity and venture capital. 67% of Millennials, for example, would consider accessing capital from a VC fund compared to just 46% of Baby Boomers.
Millennials report having been denied capital in the past year at a higher rate than their older peers – 59% of Millennials were denied capital in the past 12 months compared to 43% of Gen Xers and 27% of Baby Boomers. 49% of Millennials say they are concerned or very concerned about accessing capital for current business needs compared to 39% of Gen Xers and 27% of Baby Boomers.
Methodology
The 25-question survey was administered to 1,002 U.S. business owners or decision makers ages 22-65 who play a significant role in the financial decisions of their firms including capital decisions. The businesses surveyed have annual revenues between $5 million and $100 million. The survey was conducted online from October 9-October 17, 2017. Statistically significant figures are significant at the 95% confidence level. Margin of error is +/-3.1 percentage points.