Alternative Finances

SMB Outlook Climbing Amid Three-Year High

Results from a new survey show that optimism among U.S. small business owners is continuing to trend upward — keeping in line with what’s been seen for most of the past three years.

The results of the latest Dun & Bradstreet and Pepperdine Private Capital Access (PCA) Index show that for small businesses with annual revenues under $5 million and those between $5 million and $100 million, private capital access increased by 2.8 percent, when compared with the three months prior. Of those surveyed, nearly half of respondents said their main purpose for raising financing was for growth or expansion, which shows the uptick in optimism for the future of their business.

The survey also showed that 62 percent of respondents plan to grow in Q3 2015, which was a 12 percent increase from the year prior; 56 percent said they plan to grow due to more demand.

“Many of these signs are very positive, pointing to an improved business climate and resulting in an increased demand for private funding. And if we look at these results solely, there’s every reason to be bullish on the U.S. economy,” said Craig Everett, PhD and director of the Pepperdine Private Capital Markets Project. “But with new research indicating that consumer confidence plunged this summer to its lowest level since September 2014 and the upheaval in global economies, we remain cautious about the possibility of future volatility and its impact on small and mid-sized businesses.”

In terms of SMBs and alternative financing, the study indicated that small businesses are turning more toward non-traditional financial sources. Of those surveyed, 45 percent looked to raise funds through personal credit cards, and 55 percent sought to raise financing through a business credit card.

“The nexus between credit and growth is critical for small businesses to succeed. This recent analysis shows small businesses are resilient and continue to prove they have the resourcefulness to secure funding,” said Jeff Stibel, vice chairman of Dun & Bradstreet. “As small businesses show momentum in profitability and growth, lending should accelerate.”

Surprisingly, bank lending for those surveyed slid to 63 percent in Q3 2015 (down 3 percent, YOY). Of the 49.6 percent of private businesses who attempted financing through a bank loan in the last three months, about 37 percent said they were successful.

In terms of securing financing, 30 percent of businesses with less than $5 million in revenue were able to secure a bank loan in Q3 2015, compared to 46.1 percent the year prior. The survey showed that businesses with annual revenues under $500,000 saw less success, with 20 percent reporting receiving bank loans.

For updates on small business trends, click here to take a look at our CAN Capital Store Front Business Index, powered by PYMNTS.com, which provides a quarterly metric to measure the health of small businesses in the United States.

To check out what else is HOT in the world of payments, click here.

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