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Small businesses use a variety of financing sources for starting and growing their businesses. Startups rely about equally in personal finances and bank credit to start a business. When growth is needed, the sources of financing may become more diverse.

The Small Business Administration (SBA) states that established small businesses use owner investment and bank financing as the primary financing methods. Younger firms rely heavily on outside debt, normally a combination of bank loans, credit cards, and lines of credit totaling about three-quarters of their financing. So-called “angel financing” or venture capital accounts for only a few percent of financing for young small businesses.

Credit cards remain a primary source of small business financing. Although smaller in terms of percent of financing versus conventional loans, credit cards are popular despite the high embedded interest rates. The SBA Office of Advocacy data show that while loan standards have been tightening over the last several years, the demand for small business loans has increased. In some cases, this has forced small businesses to move to credit card financing despite their reluctance to absorb high-interest rate debt.

Some interesting demographics were derived from the SBA study:

• Women-owned businesses rely heavily on personal financing

• Women- and minority-owned businesses are more likely to use credit cards for startup or expansion

• Women are 30 percent more likely than men to self-finance their business, and only half as likely to obtain bank financing

• Hispanic- and African-American owners are the most likely to use owner equity at startup

• Veteran-owned businesses are consistent with other businesses, at about 11 percent, who look for credit financing for expansion

• Immigrant businesses are consistent in using personal capital for startup, but they are more likely to use credit cards than other groups, and tend to avoid commercial bank financing that might offer them lower interest rates

If you are a small business looking for startup or expansion financing, Shop Commercial Mortgage may be able to help you if the commercial banks have turned you down. We have private investors that are looking for opportunities to help finance your business expansion, and at interest rates that may be significantly better than using your credit cards. You can review the types of commercial loans and our Investing criteria on our website, or call us at (855) 960-6070 today to discuss your needs with us. We will work hard to secure you the loan you need to grow your business, and look forward to hearing from you.