Hiscox eDNA survey provides insight into the relationship between small businesses and lenders.
Small business owners might have great ideas, tons of motivation and the will to make their businesses succeed, but if they can’t find funding, their dreams could be over before they get started. The recently published Hiscox DNA of an Entrepreneur survey has some insights in terms of the availability of funds for US small businesses.
Only 10% of respondents agreed that “financial funding for a new business is easy to find”. But, there was a bit of variation around the country. In fact, small business owners in the Northeast were twice as likely to report that funding was easy to find vs. those in the South and the West. Is this because these businesses are closer to the money and power centers in New York and Washington or does it have more to do with fast growth areas in the South and West taking longer to recover from the housing bust and the related financial crisis?
The survey also provides insight into the relationship between small businesses and lenders over the past few years.
In a separate question, 28% of small business owners reported that they had asked to renegotiate their terms with the banks at least once since the economic downturn began in 2008. Of these owners, 31% said the banks had agreed to their request, 36% said the bank agreed only in part and 32% were denied their request. The area of the country where banks were most flexible was the Midwest, where only 24% of small business owners reported that their banks had completely denied their requests.
These results are a mixed bag, with some small businesses getting funding or relaxed terms, while others don’t. To get some more insight, we asked small business owners whether their relationship with their bank had changed in the last two years. Not surprisingly, only 9% said it had improved. But, 73% said their relationship with their bank was unchanged and only 18% said it had deteriorated. Digging a little deeper, we saw that none of the firms with revenues over $8MM reported their banking relationship had deteriorated while 20% of firms with revenues up to $160,000 had a worse relationship with their lender.
Insurance can help
Making sure your business is insured with the right small business insurance that fits your specific needs, can show lenders that you are serious about managing your risks. Having the right professional liability insurance (errors and omissions insurance), general liability insurance, and business owner insurance demonstrates to lenders that your are prepared for any potential setbacks that can come along with running a small business. Learn more about how small business insurance can help boost your chances for a loan.
It seems like funding isn’t easy to find, but is not impossible these days and banks are at least showing some flexibility given the economic landscape. What’s been your experience?