Not wanting to take on debt and believing they will be turned down, most small business owners said they prefer to not even apply for a business loan.
According to an online survey of 286 small business owners conducted by financial information company Sageworks, nearly 77% said they have never applied for a business or personal loan.
Instead, they chose other means of funding with 59% of the survey's respondents opting to use personal savings to start their businesses.
Roughly 30% said they didn't need any funding and 10.5% received funding from friends or family, according to the survey.
However, a little more than 19% of respondents relied on a loan or line of credit, Sageworks discovered.
The survey also asked small business owners why they chose other means of funding over business loans.
Sixty-two percent said it was because they did not want to take on debt, and 24% said they did not believe they would be approved for a loan.
Twelve percent thought the cost of credit was too high, while 9% said the loan process was too time-consuming, the survey noted.
Sageworks Chairman Brian Hamilton explained that this reluctance to take on debt is, in many ways, a good sign.
“Taking on too much debt can be harmful to a business. Management starts worrying about how to pay back the loans, rather than how to really scale the business,” he explained.
Lately, businesses not only have greater access to capital but they're being cautious about accepting that capital and debt, Hamilton added.
The Raleigh, N.C.-based Sageworks said it conducted an online survey of small business owners April 23-25. The poll's respondents were all business owners that had been in operation for less than 10 years.
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