Restrictive Financing Environment Is Stunting Business Growth and Hiring; Small Businesses Resort to Personal Assets to Support Business

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Study conducted in partnership with Dun & Bradstreet Credibility Corp. constitutes one of the largest independent studies done on small business, with nearly 6000 responses

LOS ANGELES — One of the largest independent studies conducted in 2012 of small businesses (5,997 businesses surveyed) by Pepperdine University’s Graziadio School of Business and Management in partnership with Dun & Bradstreet Credibility Corp. shows that the current business financing environment is restricting both growth opportunity and the ability to hire new employees, especially for small businesses. Among the 5,997 survey respondents, 64% of businesses with revenues under $5 million said difficulty in securing financing is limiting their growth potential and 55% said it is restricting their plans to grow their workforce.

The Pepperdine Private Capital Markets Project and Dun & Bradstreet Credibility Corp. release today the First Quarter 2012 Private Capital Access Index survey results which will contribute to a forthcoming new indicator to measure the demand for, activity and health of the privately-held businesses. The First Quarter 2012 study is available here: http://bschool.pepperdine.edu/accesscapital

“Unfortunately, the tight credit market is impacting our economic recovery,” 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. “Demand for credit is growing, but the supply is not meeting the demand, especially for small businesses. What we are seeing is business owners increasingly looking to unconventional financing options to grow their businesses and in some cases they are putting their expansion plans on hold altogether.”

When looking at state-by-state comparisons, the following states had a high percentage of businesses that claim they are facing limited growth opportunities due to the difficult financing environment:

  1. Nevada (75%)
  2. New Mexico (72.6%)
  3. Maryland (70.5%)
  4. Florida (70.2%)
  5. Virginia (68.8%)
  6. Delaware (68.2%)
  7. North Carolina (67.7%)
  8. California (67.4%)
  9. Georgia (66.9%)
  10. South Carolina (66.1%)

“With 58% of the survey respondents reporting $1 million or less in annual revenues, Main Street small businesses are clearly continuing to face challenges accessing capital and obtaining financing and as a result, many small business owners are tapping their personal assets to fill financing gaps,” said Jeffrey Stibel, chairman and CEO of Dun & Bradstreet Credibility Corp.

The research found that 46% of business owners with revenues under $5 million transferred personal assets to their business over the prior six months compared to 25% of business owners with revenue between $5 million and $100 million. When asked what types of personal assets they tapped into, 68% of both large and small businesses transferred funds from personal savings or investments.

“As small businesses struggle to secure financing from traditional lenders, they are increasingly dipping into their own pocketbooks,” continued Dr. Paglia. “As long as business owners have personal assets to tap and it makes economic sense to do so, we may continue to see business owners continue this trend until the financing environment improves.”

The top states throughout the country that had a high concentration of business owners who stated that they had transferred personal assets to their business over the prior six months were:

  1. Nevada (56%)
  2. Wyoming (55%)
  3. South Carolina (54%)
  4. Colorado (50%)
  5. Arizona and Virginia (both 49%)

About the Pepperdine Private Capital Access Index

The First Quarter 2012 research study, which includes 5,977 responses, is part of the Pepperdine Private Capital Access Index (PCA). The PCA Index is a quarterly indicator produced by the Graziadio School of Business and Management at Pepperdine University in partnership with Dun & Bradstreet Credibility Corp. The index 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. http://bschool.pepperdine.edu/accesscapital

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