Most Small Businesses Go It Alone, Without Debt or Equity Financing

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SurePayroll’s survey of small business owners finds that nearly two-thirds of small businesses have no need for external financing.

A recent SurePayroll survey of small business owners sheds new light on small business financing and belies a few common myths about business financing, including the role that external financing plays in determining small business success.

"Read any book on small business and you'll find a big chapter on small business financing options. You may get the sense that access to capital determines whether a fledgling small business succeeds or dies in its infancy," notes SurePayroll President Michael Alter. "The reality is that most small businesses go it alone, without any external financing."

Cash Flow is King

In SurePayroll's most recent survey of small business owners, 81% of owners indicate that they have never received any outside equity or debt financing. 55% of surveyed business owners indicate they have no need and no future plans to get external funding for their businesses.

"America's small businesses are powered largely by positive cash flow," comments Alter. "Most entrepreneurs dip into personal savings and leverage credit cards to start their businesses. Once the businesses are in motion, the main source of funding is revenues from sales. While some entrepreneurs leverage outside financing, such as bank loans and venture capital, those that do are only a small fraction of the total business owner population."

It appears, however, that some small business owners go without external financing because they feel that their financing options are limited. Of the business owners who noted that they do not have any external financing, more than one-third (38%) indicated they believe it’s too difficult for small businesses to get external funding. Indeed, 8% of the unfunded business noted that they would like to get external financing but do not know how to go about obtaining it.

Funded Companies Prefer Debt Financing

For those businesses that tap outside capital resources, debt funding appears to be the most accessible funding source. 40% of the funded companies financed growth through debt financing, whereas only 29% received equity financing. The remaining respondents indicated that they have a combination of debt and equity financing.

Bank loans were the biggest source of funding, with 87% of the funded business owners indicating that they had received their financing from a bank. 7% of the funded companies had received venture capital or private equity financing. The remainder, 6%, tapped friends and family for their financing.

Surprisingly, most of the companies that were funded (52%) indicated that the funding process was easier than expected. 42% noted that finding financing was as difficult as they had expected. The remaining 6% indicated that finding financing was much more difficult than they expected.

The survey provided the opportunity for funded business owners to provide advice to their unfunded peers. Three key pieces of advice were mentioned multiple times:

  • Have a Written Business Plan. Funded business owners frequently mentioned that it's important to be organized for lender meetings, with a thorough business plan and well-substantiated projections of future revenues.
  • Build Relationships with Bankers. Developing good relationships with lending institutions is viewed as the key to securing debt financing from a bank.
  • Shop Around. If one lender is willing to fund you, others will too. So, look for the best deal.

About SurePayroll

Privately held SurePayroll is America's fifth largest full-service payroll provider and the nation's largest online full-service payroll provider. SurePayroll is passionate about small businesses and their payroll. They are dedicated to providing an extremely friendly, attentive online payroll experience — at a price small business owners can afford.

In addition to providing payroll services directly to small business, SurePayroll also provides a private-label payroll service that allows SurePayroll's numerous partners to offer payroll processing to their small business clients. Business partners include ABN AMRO, Pitney Bowes, and MasterCard. SurePayroll will process nearly $3 billion in employee and contractor payroll payments in 2006. For more information, visit

For Media Inquiries Contact:

Ken Gaebler

Walker Sands Communications
Phone: (312) 543-0654


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