CHICAGO — October 17, 2006 — A recent SurePayroll survey of small business owners sheds new light on small business financing and belies a few common myths about business financing, including the role that external financing plays in determining small business success.
"Read any book on small business and you'll find a big chapter on small business financing options. You may get the sense that access to capital determines whether a fledgling small business succeeds or dies in its infancy," notes SurePayroll President Michael Alter. "The reality is that most small businesses go it alone, without any external financing."
Cash Flow is King
In SurePayroll's most recent survey of small business owners, 81% of owners indicate that they
have never received any outside equity or debt financing. 55% of surveyed business owners indicate
they have no need and no future plans to get external funding for their businesses.
"America's small businesses are powered largely by positive cash flow," comments Alter. "Most entrepreneurs dip into personal savings and leverage credit cards to start their businesses. Once the businesses are in motion, the main source of funding is revenues from sales. While some entrepreneurs leverage outside financing, such as bank loans and venture capital, those that do are only a small fraction of the total business owner population."
It appears, however, that some small business owners go without external financing because they feel that their financing options are limited. Of the business owners who noted that they do not have any external financing, more than one-third (38%) indicated they believe it's too difficult for small businesses to get external funding. Indeed, 8% of the unfunded businesses noted that they would like to get external financing but do not know how to go about obtaining it.
Funded Companies Prefer Debt Financing
For those businesses that tap outside capital resources, debt funding appears to be the most
accessible funding source. 40% of the funded companies financed growth through debt financing,
whereas only 29% received equity financing. The remaining respondents indicated that they have a
combination of debt and equity financing.
Bank loans were the biggest source of funding, with 87% of the funded business owners indicating that they had received their financing from a bank. 7% of the funded companies had received venture capital or private equity financing. The remainder, 6%, tapped friends and family for their financing.
Surprisingly, most of the companies that were funded (52%) indicated that the funding process was easier than expected. 42% noted that finding financing was as difficult as they had expected. The remaining 6% indicated that finding financing was much more difficult than they expected.
The survey provided the opportunity for funded business owners to provide advice to their unfunded peers. Three key pieces of advice were mentioned multiple times:
About SurePayroll:
SurePayroll is the online alternative to ADP® and Paychex®. SurePayroll's service and team members are dedicated to providing an easy, convenient online payroll service at a price small business owners can afford. Tens of thousands of customers rely on SurePayroll to process payroll wherever they want in as few as two minutes.
In addition, SurePayroll offers small businesses solutions for managing 401(k) plans, health insurance, workers' compensation, HR compliance and employee screening. For accountants and banking partners, SurePayroll provides private-label services that enable them to offer payroll processing to their small business clients.
Over the last decade, SurePayroll has received numerous prestigious awards for its innovative technology and outstanding customer service, including recognition from PC Magazine, Inc. 500, Accounting Today, the Stevie Awards and many others.
For more information, you can visit http://www.surepayroll.com, call 877.954.7873 or follow us on http://twitter.com/SurePayroll.
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