No collateral? No funding, says recent study

10/21/2011

According to a recent survey from Philadelphia-based loan adviser MultiFunding, collateral has exceeded credit and cash flow when it comes to receiving a small business loan, CBS Local reports.

MultiFunding CEO Ami Kassar pointed out small businesses need access to capital to thrive, but nearly 50 percent of the 250 small business owners studied paid a higher premium than larger companies because they didn't have proper collateral.

A total of 31 percent of business owners in the study were "asset rich," meaning they have enough equity in their homes, buildings or equipment to satisfy collateral requirements. Interest rates for this group typically range from 3 percent to 8 percent annually.

Marginal business owners made up 47 percent of the study's participants. These managers didn't have the required assets and therefore pay a higher premium because of their lack of collateral.

Lastly, 15 percent turned out to be non-lendable business owners, who, due to either bad credit, poor cash flow, lack of collateral or a combination of the three, were ineligible for any type of financing.