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Small Businesses Expecting Growth, but Face Challenges Accessing Working Capital, according to CAN Capital’s Small Business Health Index

SBHI Q3 2016

Majority Remain Susceptible to EMV Fraud Charges

New York, NY (August 22, 2016) – Small businesses are overwhelmingly positive in their  expectations for the next 12 months, with 64 percent anticipating growth, according to the Small Business Health Index from CAN Capital, the market share leader in alternative small business finance. With growth comes the need for funding to finance expansion and new projects, but 42 percent of small business owners say it’s quite or extremely challenging to gain access to working capital.

Most small businesses are in need of smaller amounts of capital, which the traditional loan process typically doesn’t allow for. Specifically, 66 percent of small business owners are looking for amounts of $50,000 or under when seeking funding, with the top reasons being to purchase equipment and/or inventory (22%) or to expand operations (21%).

“It’s encouraging to see small business owners feeling so good about their prospects for growth,” said Daniel DeMeo, Chief Executive Officer, CAN Capital. “To ensure they are able to achieve their goals, it’s important that they have fast, efficient access to working capital to fuel their expansion.”

Surprisingly, 87 percent of small business owners have never tried obtaining working capital from an online finance provider, highlighting the need for educating small businesses on alternative sources of funding. When small business owners successfully secure funding, the most-used options are traditional banks (28%), credit cards (25%) and friends and family (21%).

“It’s clear that small business owners don’t always know how to find the kinds of loans they need,” said DeMeo. “For those in need of larger loans, there are an array of options, including traditional bank loans. But when small business owners come to us for access to working capital, the average loan amount is about $50,000. Many banks and other financial institutions find it inefficient to loan in these smaller amounts, leaving a huge gap in the market for small businesses. Alternative finance companies are able to fill that gap, and do so with real-time approvals and fast funding, so business owners can get back to running their businesses instead of searching for capital.”

Opportunities & Challenges

As mobile payments options are expanding and growing in popularity among consumers, more small businesses are recognizing the need to tap into this payment offering for customers. Thirty-four percent of small businesses currently accept mobile payments such as Apple Pay, a notable increase from April 2015 when only 13 percent were accepting this form of payment.

However, despite last year’s October 1st deadline for small businesses to upgrade their POS systems to accept EMV chip enabled credit cards, 73 percent of small business owners say their current POS systems are not EMV compatible. That means a large majority of small businesses would be liable for consumer losses if an in-store transaction is conducted using a counterfeit, stolen or compromised card. Despite these potential costs and liabilities, 70 percent of small business owners do not plan to invest in new payments technology in the next twelve months.

DeMeo said, “It’s concerning how many small businesses are leaving themselves open to paying for liabilities and losses from potential credit card fraud. By working with payment processors, small businesses should work out a plan to upgrade their payment systems both to protect themselves and to better serve their customers.”

Though small business owners are feeling positive about the near term, they do see some potential threats on the horizon. Specifically, excessive regulation (25%), competition from big box retailers (20%) and rising operational costs (18%) are seen as the biggest threats to small businesses today.

With the election just a few months away, small businesses are keeping a close eye on the impact the issues being debated could have on them.  Sixty percent of small business owners do not agree with increasing the minimum wage to $15 an hour, a hot topic among the presidential candidates. When asked which presidential candidate would be the best for small businesses, 37 percent cited Donald Trump, 21 percent Hillary Clinton and 42 percent said neither.

 

The CAN Capital Small Business Health Index measures small business owners’ sentiment about economic, business and consumer trends as well as other factors such as access to capital, growth and competition.

CAN Capital conducted an online study of small business owners between July 12 – July 18, 2016. Respondents included small business owners from across the United States. Percentages are based on 1,000 responses.

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