According to the results from the recent Pepperdine Private Capital Markets Project (PPCMP), business owner confidence has increased 53% from Spring 2010 to Spring 2011. Similarly, business owners outlook on growth opportunities has increased 20% over the past year.
While business owners are enthusiastic about growing, many of them lack the financial resources to do so. Nearly 95% of the 1,221 privately-held businesses that responded to the survey report having the enthusiasm to execute growth strategies, yet just 53% said that they have the necessary financial resources to successfully execute their expansion plans.
Approximately 54% of those businesses attempting to raise capital in the last six months were unsuccessful and of those that were successful, approximately 59% of them secured bank loans followed by 20% who secured financing from friends and family. Just 13% of privately-held businesses that responded to the survey reported securing funding from Angel Investors, Venture Capitalists and Private Equity combined.
Businesses need capital to grow and build value, but unfortunately the supply is not meeting the demand, said Dr. John Paglia, lead researcher of the Pepperdine Private Capital Markets Project and associate professor of finance at Pepperdine Universitys Graziadio School of Business and Management. Increasing availability to all sources of capital, especially bank loans, will give businesses the resources they need to hire more employees and expand their operations both of which will improve our economy.
Findings from Summer 2011 PPCMP report revealed that access to capital is very competitive: banks denied approximately 60% of loan applications over the last six months; Angel Investors funded just one business plan of 25 reviewed; Venture Capitalists funded just one business plan of 80 reviewed; and Private Equity funds invested in just one business plan out of approximately 150 reviewed.
Other key findings:
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