Small businesses are slightly more likely to seek financial services from large banks than smaller financial institutions, according to the recently released annual report from the Securities and Exchange Commission’s Office of the Advocate for Small Business Capital Formation.
The survey, taken from July 1, 2020, to June 30, 2021, found that 83 percent of small businesses sought such services from either small or large banks. Forty nine percent of the surveyed small businesses said they had used a large bank for financial services, slightly more than the 45 percent who reported using the services of smaller banks.
Last year brought a boom in new business applications, reaching nearly 4.5 million by the end of 2020, a nearly 25 percent increase from 2019 and 51 percent higher than the average from 2010-19, according to the Economic Innovation Group.
Nearly 9-in-10 small businesses relied heavily on loans or lines of credit for capital. Far fewer relied on credit cards for external capital funding, trade credit and merchant cash advances, leasing and equity investments. Lagging further behind were financial service companies (23 percent), credit unions (12 percent), online lenders or fintech firms (11 percent) and finance companies (8 percent). Thirty-seven percent of small businesses sought financing during the survey period. Of those, less than one-quarter received less money than they requested.
Sixty-three percent of small businesses reported not applying for funding. For those companies, 44 percent said weak cash flow was a discouraging factor, with slightly less citing insufficient collateral, too much existing debt, low credit scores and insufficient credit history as considerations.