Small businesses turn to other financing options

5/27/2011

While financial institutions are still the primary sources of financing for many entrepreneurs, a growing number of small business owners are looking elsewhere to secure funding, a new report from Capital Access Network suggests.

More than one-third of respondents (34 percent) said they have received commercial loans from banks recently, while 10 percent have looked to other options, such as Merchant Cash Advances, non-traditional loan providers, peer-to-peer lending and factors. According to the report, this is because the economic recession has impacted the credit scores of many small business owners, making it more challenging to receive traditional bank loans.

"Small businesses must be vigilant in exploring alternative finance options. While traditional bank loans may be preferred, they may not be the most available or best option for Main Street businesses," says Glenn Goldman, CEO of CAN. "New products and features are making their way into the marketplace and are often a better fit and easier to access."

A number of small business owners are opting for small business credit cards instead of loans. However, as Pew recently noted, credit cards come with their own disadvantages as well.