Where Do You Find Small Business Funding? Not Where You Think.

Posting this article, with one additional note. If you are looking for small business fuding from a bank, please also check out the SBA lender rankings for financial institutions in your state or region. A list of the Top 25 Lenders nationally is at the bottom of this article. You can also use the SBA Loan Search Tool to identify the types of loans that may be available to you. - JD

Small Business Financing is Available - Just Not Where You're Looking

Posted by Ty Kiisel on forbes.com, 9/24/13 - Last week I read an interesting piece Charles Green published on the Coleman Report referencing Pepperdine University's quarterly Private Capital Access Index for the second quarter of 2013. The report suggests and Green points out that where many small business owners are looking for capital isn't where they're finding it. This is very consistent with what we observe at Lendio. Although where small businesses are looking for financing isn't much of a surprise, where they're finding the money they need might be. Where are they looking?

59% are looking at the bank

57.2% turn to business credit cards

49.9% access their personal credit cards

48.4% sought out a personal loan

44.2% went to friends and family

It shouldn't be a surprise that most small business owners still feel like the local bank is the first stop they should make when looking for a loan. In fact, 63% of the survey respondents answered the most likely source of financing would be the bank. However, it doesn't take too many rejections before they turn to other sources like their credit cards or a personal loan-or simply stop looking for financing all together.

You might be interested to know that the successes survey respondents were having fell out in the opposite order when compared to where they were looking:

71% found success with friends and family

58% used their personal credit cards

57% used trade credit

54% used business credit cards

27% found success at the bank

With a few exceptions . . . far too many banks (in my opinion) are moving upstream to bigger businesses and hopefully bigger profits, leaving the small businesses you and I identify with out in the cold. Unfortunately, most small business owners, 63%, pin their hopes on a system that is leaving them behind.

Nevertheless, I don't believe the needs of most Main Street businesses are met by equity funding or the same machine that funds big business-or even the bigger small businesses funded with the Small Business Administration's (SBA) 7(a) loan program. I do believe the biggest job creator in the country (small Main Street businesses) deserve more than lip service from the financial industry and maybe even the SBA.

I'm a big fan of making more capital available to Main Street. And, in some instances, a dismal 27% of the time, business owners are able to find the funding they need from the local bank. The rest of the time, business owners are either turning to alternative funding sources or have abandoned their search for financing all together. I think the Pepperdine report brings into focus the disparity between many small business owners' expectations, the banking industry's claims, and the reality of small business lending.

Granted, alternative financing is more expensive than a traditional loan at the bank. Even though those costs are coming down, non-bank financing still comes at a premium. However many small business owners, when given the choice, will choose expensive financing to no financing.

I'm not suggesting that alternative financing is the man on the white horse that will save small business-I don't believe there is such a thing-but I am suggesting that used wisely, and with discretion, alternative financing is a valuable resource for short-term infusions of capital to fuel growth or help a business owner over a cash flow bump.

Source: Illinois Small Business Development Center at Elgin Community College - email 12/3/13

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Lender	Number of Loans	Gross Approval Amount
Wells Fargo Bank, National Ass	3,481	$ 1,471,396,700
U.S. Bank National Association	2,519	$ 639,496,900
Live Oak Banking Company	609	$ 593,051,300
JPMorgan Chase Bank, National	3,637	$ 486,000,900
The Huntington National Bank	3,062	$ 465,382,300
Celtic Bank Corporation	619	$ 301,838,400
Ridgestone Bank	300	$ 289,310,800
BBCN Bank	271	$ 218,659,300
Seacoast Commerce Bank	278	$ 217,280,600
Compass Bank	1,073	$ 214,689,300
Noah Bank	169	$ 211,961,500
Newtek Small Business Finance,	208	$ 199,246,100
Wilshire State Bank	315	$ 177,086,000
TD Bank, National Association	533	$ 176,283,000
SunTrust Bank	252	$ 174,641,900
Bank of the West	230	$ 163,598,400
Manufacturers and Traders Trus	1,156	$ 162,816,000
Commonwealth Business Bank	156	$ 140,584,300
KeyBank National Association	503	$ 139,785,300
Republic First Bank d/b/a Repu	111	$ 136,522,100
Sterling Savings Bank	250	$ 126,154,600
Hanmi Bank	86	$ 125,869,000
Open Bank	111	$ 122,532,100
CertusBank, National Associati	78	$ 121,838,600
Fifth Third Bank	177	$ 114,018,100

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