Over Half of Small Businesses Had Unmet Funding Needs
The Federal Reserve’s analysis of overall funding efforts for all small businesses demonstrates a market of unmet financial needs. In 2020, a total of 47% of firms met their funding needs, while the other half (53%) still needed capital.
23% of firms saw a “financing shortfall.” They were partially approved but still needed more funds. The other 30% have unmet funding needs because they never applied according to the survey- they’re scared of debt, risk-averse, or don’t meet requirements.
Those that did not apply for funds would have if they were not discouraged by weak sales (44%), insufficient collateral (41%), low credit (33%), and too much debt already (36%).
83% of companies used a bank or small bank as their primary financial service provider, while only 11% said an online lender or fintech was their primary.
Meanwhile, in the funding world, MCAs were only sought by 8% of all funding applicants last year, compared to 89% of firms applying for a loan or line of credit.
Most firms that went for an MCA went with a bank. 85% percent of firms that applied for a loan, credit, or cash advance used a large or small bank. In contrast, only 20% of firms applied to an online lender, falling from 33% since last year.
42% of firms that worked with online lenders or fintech companies were dissatisfied with support during the pandemic. Comparatively, firms that did receive some funding from an online lender were far happier: only 18% were dissatisfied.