Jun 10, 2013 Sean Albert
The rate of entrepreneurship across America is increasing, but lenders are not taking advantage of the demand for small business capital.
According to a report conducted by experts from Babson and Baruch College, startup rates jumped last year. The 2012 Global Entrepreneurship Monitor U.S. Report showed that the Total Early-Stage Entrepreneurial Activity Rate was at 13 percent in 2012. It's the highest mark ever recorded since the study was first conducted in 1999.
Despite the need for capital assets, many small business owners aren't utilizing the services of lending outlets. Rather, 82 percent of the funding for startups last year came from personal, family or friend-related resources. With the average entrepreneur needing $15,000 to start a company, according to the GEM report, it's a significant source of business that lenders are neglecting.
The latest Small Business Lending Index from Biz2Credit shows that most financial institutions are not providing loans to small firms. During April, just 16.8 percent of small business loan applications at big banks were granted. Community banks performed better, approving 50.9 percent of applications.
However, short term and alternative lenders appear to be the most likely outlet for small business loans. The source reported that 63.4 percent of loan applications from small business owners were approved by these enterprises in April.