A new study by Dun & Bradstreeet Credibility Corp. and Pepperdine University's Graziadio School of Business and Management finds that bank loans tops the list of financing sources for small businesses
LOS ANGELES, Calif. (June 23, 2012) — A survey from Pepperdine University’s Graziadio School of Business and Management, conducted in partnership with Dun & Bradstreet Credibility Corp., shows that bank loans top the list of expected financing sources. Sixty-eight percent (68%) of those seeking financing in the next six months said they will pursue a bank loan as a likely source of financing followed by 40% who said they will use a business credit card and 36% who will look at a credit union or Community Development Financial Institutions Fund (CDFI).
The recently collected data by the Pepperdine Private Capital Markets Project and Dun & Bradstreet Credibility Corp. as part of the First Quarter 2012 Private Capital Access Index study (http://bschool.pepperdine.edu/accesscapital ) also shows 67% of respondents who were unsuccessful in securing a bank loan say the general category of financing is a still a good fit for their business. In general, business owners with revenue between $5 million and $100 million were more optimistic about successfully raising financing from banks than businesses with revenues under $5 million. When ranking on a scale from 0-4 businesses with revenue between $5 million and $100 million ranked their level of confidence in securing a bank loan at 2.3 whereas businesses with revenues under $5 million ranked their confidence in securing a bank loan at 1.4.
The data, based on nearly 6,000 survey responses, contrasts with findings released in December 2011 which showed that 37% of respondents attempted to raise capital in the past 12 months through bank loans. Previous data also showed that half of respondents (49%) sought to use credit cards. Overall, in December, less than half (41%) of the 523 private businesses looking for capital were successful.
“In many ways, bank loans are a bellwether of the strength of our economy,” said Dr. John Paglia, director of the Pepperdine Private Capital Markets Project and associate professor of finance at Pepperdine University’s Graziadio School of Business and Management. “As business owners secure more traditional sources of financing and rely less on their own personal resources, they will have more discretionary money to spend thereby stimulating our economy."
Jobs ACT Will Not Spur IPO Financing
The Private Capital Access Index also looked at how businesses view the JOBS Act, which in part relaxed some rules that made it difficult and expensive for companies to offer an Initial Public Offering (IPO). While many people thought the JOBS Act would increase the likelihood that business owners will raise capital through an IPO, 82% of business with revenue between $5 million and $100 million and 76% of businesses with revenues under $5 million said that it would not affect their decision. While about a quarter (23%) of the survey respondents remained unsure only 1% said that the JOBS Act increased the likelihood that they would raise capital via an IPO or that it had accelerated plans already in place for an IPO.
“Clearly the JOBS Act has made it easier for entrepreneurs to take their businesses public, but that message has not been made clear,” said Jeffrey Stibel, chairman and CEO of Dun & Bradstreet Credibility Corp. “At first glance, businesses do not seem to be making different decisions based on the new policies. This may be due in part to the fact that the government needs to better educate businesses about the benefits that stem from the JOBS Act.”
The First Quarter 2012 study is available here: http://bschool.pepperdine.edu/accesscapital.
About the Pepperdine Private Capital Access Index
The survey, which includes 5,977 responses, is part of the Pepperdine Private Capital Access Index (PCA). The PCA is a quarterly indicator produced by the Graziadio School of Business and Management at Pepperdine University with the support of Dun & Bradstreet Credibility Corp. The index is designed to measure the demand for, activity, and health of the private capital markets and will be released for the first time in summer 2012. The purpose of the PCA Index is to gauge the demand of small and medium-sized businesses for financing needs, the level of accessibility of private capital, and the transparency and efficiency of private financing markets.
About the Graziadio School of Business and Management
Founded on the core values of integrity, stewardship, courage, and compassion, Pepperdine University’s Graziadio (GRAT-ZEE-ah-DEE-oh) School of Business and Management has been developing values-centered leaders and advancing responsible business practice since 1969. Student-focused, experience-driven, and globally-oriented, the Graziadio School offers fully accredited MBA, Masters of Science, and bachelor’s completion business programs. More information found at http://bschool.pepperdine.edu/newsroom/.
About Dun & Bradstreet Credibility Corp.
Dun & Bradstreet Credibility Corp. is the leading provider of business credit building and credibility solutions for businesses. The company helps businesses establish their credit with a D&B D-U-N-S Number and provides the only business credit solution available to companies looking to build, monitor, and impact their business credit and credibility. The company’s headquarters are in Los Angeles, CA with offices throughout the United States. For more information on the company, please visit www.DandB.com. Twitter: @DandB