SMEs Aren’t Trying Out Alt-Lenders

The latest CAN Capital Small Business Health Index was released this week, offering insight into where SMEs of the U.S. are at in terms of their vision for the future.

According to the data, small businesses are looking towards a bright year, with 64 percent reporting that they anticipate growth over the next 12 months. But with plans for success, their opportunities for funding that growth may be restricted.

CAN Capital found that 42 percent of small business owners say it’s either “quite” or “extremely” challenging to access working capital. Analysts said this could be due to the fact that most companies are seeking small loan amounts, which is difficult to find via traditional financing processes.

The survey found that 66 percent of SMEs need loan amounts of just $50,000 or under. The most common reason for wanting financing is to purchase equipment or inventory, closely followed by the need to expand operations.

Considering the challenge of accessing small loan amounts through traditional means, like banks, some may find it surprising that CAN Capital researchers found 87 percent of SMEs surveyed said they have never attempted to access working capital financing through an online lending platform.

The most common destination is banks, followed by credit cards and family and friends.

In a statement, CAN Capital Chief Executive Officer Daniel DeMeo said the data reveals the need for greater awareness of alternative financing options.

“It’s clear that small business owners don’t always know how to find the kinds of loans they need,” he said. “For those in need of larger loans, there are an array of options, including traditional bank loans.”

“But when small business owners come to us for access to working capital, the average loan amount is about $50,000,” the executive continued. “Many banks and other financial institutions find it inefficient to loan in these smaller amounts, leaving a huge gap in the market for small businesses.”

Alternative lending platforms, he added, can fill that gap.