FINANCING SMALL BUSINESSES

How do small businesses use loans to finance their operations?

According to researchers at the SBAs Office of Advocacy, in the second quarter of 2013, commercial, industrial, non-farm, non-residential, and non-commercial real estate loans accounted for 94.1% of all loans, while commercial real estate made up the largest percentage of dollar volume or capital loaned, at 50.7%.

Why are business loans increasing?

Many experts believe that as loan restrictions relax and interest rates improve, more small businesses will be inclined to accept loans made available to them.

Why do small businesses borrow money?

Small businesses turn to outside sources to fund their businesses for many reasons, including: financing the business's initial start-up cost; purchasing inventory; expansion; and improving the financials and/or cash position of the business.

How large an effect do small businesses have on borrowing in the United States?

The SBA reports that small businesses accounted for approximately $1 trillion in borrowing (for the most recent year tracked, 2010). This borrowing activity may be categorized further to outright loans worth $652 billion, and lines of credit extended ($460 billion).

On average, how much money do new companies require to start their operations and activities?

According to the Kauffman Foundation, in a sampling of many new companies (that may be larger than the national average), new companies require approximately $80,000 per year. The median or middle amount required to start a business is approximately $50,000. New companies tend to require capital from owners directly and bank credit, when possible or required to fuel their beginning operations. In its rigorous data collection set, Survey of Business Owners, the U.S. Census Bureau found that one-third of all non-employer firms and 12% of employer firms required no start-up capital. Furthermore, twenty percent of all employer firms required less than $5,000 in start-up capital.