Study Evaluates SMBs Financing Preferences

A new survey of small businesses' financing preferences shows banks to be the ideal source of working capital, despite the fact that lending has severely weakened since the beginning of the recession, effectively stalling entrepreneurship and business incorporation.

According to Capital Access Network's Spring 2011 Small Business Barometer, 43 percent of SMBs view banks as the most desirable sources of credit, but only 34 percent turn to banks first. Twenty-eight percent of respondents claimed they approach alternative providers first, and 27 percent claimed they look to their credit cards for initial financing.

However, entrepreneurs filing a business should be wary of the various dangers involved in credit card financing, as recent studies have shown most business credit card issuers do not include protections outlined under the CARD Act.

Still, many business owners remain too skeptical of traditional lenders to rely on them for substantial amounts of credit.

"The past few years my confidence in banks has lessened and I’ve started looking for capital elsewhere," said Jason Roberts, a Subway franchisee and customer of a merchant cash advance provider. "Companies and financial institutions that are innovative enough to provide alternatives are the way of the future."

Study Evaluates SMBs Financing Preferences

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