Jul 03, 2013 Sean Albert
Startups that receive small business loans are more likely to succeed than companies that fail to borrow prior to launching.
A new study from Accion Texas found that borrowing increased the likelihood of a startup's survival by 44 percent. Also, small companies that took out loans saw sales increase by 72.9 percent, compared to 41 percent for business that did not explore lending options.
"It is exciting to have independent verification of what we have always known in our hearts and experienced to be true: Enterprising small business owners will succeed if given access to credit and opportunity," said Janie Barrera, CEO of Accion Texas.
Small business borrowing is also beneficial for the workforce. The source indicated that companies that take out loans can double the size of their employee base.
According to Biz2Credit, short term lenders are the most likely source for startup funding. In its latest Small Business Lending Index, the source found that 63.3 percent of loan applications from small companies were approved by such lenders in May.
Big banks were the least likely to offer capital to small firms, with just 17.3 percent of loan applications approved.