Blog for Rural America

The Center for Rural Affairs, a private, non-profit organization, is working to strengthen small businesses, family farms and ranches, and rural communities. Permission to reprint items from this web log is hereby granted, on the condition that clear credit is given to the original source of the material. If the blog provides information for a story, please let us know by sending an email to

Thursday, March 02, 2006

Small Business Starved for Financing

Small Businesses Starved for Financing
A new survey shows a lack of available capital for small and start-up businesses

by Jon Bailey,

A recent survey of the self-employed and microbusiness owners shows the need for public policy attention to the capitalization of such businesses. The National Association for the Self-Employed (NASE) survey revealed that only one in ten self-employed or small business owners thought there were adequate funding resources for microbusinesses.

This lack of small business capital was also revealed in the primary sources of start-up capital for self-employment and small businesses. Personal savings and credit cards are the primary sources of start-up capital for 70 percent of the surveyed businesses. Only six percent employed loans from financial institutions or the government as the primary source of start-up capital.

Ongoing capital for small businesses or self-employment was little different. Personal savings (40 percent) and credit cards (19 percent) were identified as the primary sources of ongoing capital. Lending institutions provided a bit more capital for established businesses, but still less than 10 percent.

The obstacles faced in gaining access to capital by the surveyed businesses are familiar ones to those providing services to entrepreneurs. Credit rating, lack of collateral, and bank regulations and paperwork (these items were identified as the largest obstacle to capital by over two-thirds of the survey respondents) are obstacles faced by many entrepreneurs, particularly low and modest-income and start-up entrepreneurs.

The results of the NASE survey demonstrate the public policy needs for small businesses and entrepreneurship development. Despite the demonstrated validity of small business development in rural areas of the nation, there still exists a lack of public and private capital available to entrepreneurs, particularly start-up entrepreneurs.

Public resources through state and federal programs are not extensive enough to meet the entrepreneurial demand in many communities, and those that do exist are in a constant defensive posture to salvage their existence and some degree of resources. This is particularly true at the federal level where Small Business Administration programs for microbusiness capital are annually served up for elimination by the President’s budget and then saved but downsized by Congress. Meanwhile, the demand for such capital, particularly in rural areas starved for economic development resources, increases.

A nation that depends on entrepreneurship for job growth and economic vitality should not have to depend on maxed out plastic and penniless savings to build and maintain its business and asset infrastructure.

post a question or comment here or contact John Crabtree,

Center for Rural Affairs
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