Many small business owners are not taking advantage of subsidy sources like crowdfunding, small business loans and government loans, according to a survey by the Sam’s Club/Gallup Microbusiness Tracker.
Microbusinesses, defined as companies with five or fewer workers, are far more likely to use their personal savings to keep their heads above water when starting out. One in ten people are employed by a microbusiness, or own their own.
Fewer than three percent of microbusinesses use grants, government loans or crowdfunding to raise capital. This results in a high level of anxiety and a negative outlook for many entrepreneurs.
Savings, credit cards and money from loved ones
More than 60% of new microbusiness owners are tapping into their savings accounts as the primary source of capital for their businesses. Forty-three percent are putting business expenses on credit cards, and 22% rely on money borrowed from friends and family members. Microbusinesses launched in the last year are 30% more likely to use their personal savings than a more established business is.
Meanwhile, business owners are overlooking some obvious sources of funding. Very few entrepreneurs and microbusinesses sought help from government loans, crowdfunding or grants. Only 2.7% used a government loan, 2.4% used a small business loan, and 1.9% used crowdfunding to back their businesses.
Business is good, the economy is not
Among microbusiness owners, there is a strong sense of purpose and confidence when it comes to their businesses, but not so when they talk about the economy.
To generate more revenue, 42% of microbusinesses say they’ve raised their prices over the last year. Two in five raided their retirement or personal savings to scratch up more capital. Still, 70% of them report being energized by their work, and 65% are confident they have what it takes to make their business thrive. Although 54% of those surveyed said the economy was getting worse, the majority seemed to feel their business would pull through any hard times.
“Despite concerns over worsening economic conditions, U.S. microbusiness owners are confident in nearly every dimension of work and life,” said Rosalind Brewer, president of Sam’s Club. “This vital segment of the U.S. economy is passionate about their choice to pursue a small business venture and unwavering in their commitment to serving consumers with an intense focus on quality no matter how many other factors or challenges they may face.”
The Sam’s Club/Gallup Microbusiness Tracker surveyed 1,004 businesses with five or fewer employees and was conducted in May 2014.