With Banks Slow to Lend, Small Businesses Seek Alternative Funding

When it comes to securing a loan for a small business, it’s natural to think a bank is the best bet. And that may be true, but a loan may be more difficult to secure than you think.

Pepperdine University’s Private Capital Access Index, which examines business and private capital, had some interesting findings for the second quarter of 2013, as detailed by the Coleman Report:

Of small companies that were in search of funding, 59 percent targeted banks. The next highest percentage looked to business credit cards (57.2), personal credit cards (49.9), personal loans (48.4) and friends and family (44.2).

The success rate turns that list upside down. Seventy-one percent got funding assistance from friends and family, but only 27 percent did from banks.

What to do when banks give you the stiff-arm? Some businesses turn to alternative financing, in which loans are more accessible and faster, and not necessarily dependent on collateral. But these loans or cash advances can cost much more in the long run.

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