The current market for raising private capital is still tight. “About half of [business] owners can’t get financing,” says Rob Slee (MidasNation), who partnered with Pepperdine University and Dr. John Paglia to survey private capital markets beginning four years ago and updated every six months since. “Only about a third of the owners [surveyed] are able to attract bank financing,” Slee adds, as the chart below reveals. The percentages add to more than 100, because many owners obtain more than one source of capital.
The good news: The success rate for those who do secure financing are much higher than Slee expected: 78% to 89% for owners who sought funds from family/friends; 26% to 39% for angel financing; and 23% to 54% for private equity. “It takes a few knocks on the door to get money,” said Slee, who published the survey excerpts in the most recent MIdasNotes. What do the data tell us? “First, even though there’s generally a lack of capital for private businesses, some owners are getting funded,” Slee says. “Second, owners will do what they have to do to get funded, regardless of cost of capital. . . . The world of capital is an uncertain place, and there’s every reason to think that will continue for small businesses.”
Free Pepperdine fall report: Pepperdine has just made its Fall 2011 Business Financing Report available as a free download. “I would also encourage you to stay in contact with the project by joining our LinkedIn Group, Pepperdine Private Capital Markets Project,” says Dr. Paglia. To join, click Join Group.
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