In general, small businesses have a more difficult timeobtaining credit than their larger counterparts. One reason is thatdefault rates are higher in the small business loan market,especially given the fact that small businesses fail at a higherrate than larger businesses. Another reason is that it is oftenmore difficult for lenders to evaluate small business loanapplications, since there is often not a lot of publicly-availableinformation on their businesses. In addition, small businessfinancial statements are not always very detailed, and, in manycases, owners often mix their business finances with their personalfinances.

According to a report published by the National Federation ofIndependent Business (NFIB) in January 2012, “Small Business,Credit Access, and a Lingering Recession,” 16 percent of employerswith zero to one employees had a business loan, 22 percent with twoto four employees had a business loan, 37 percent with five to nineemployees had a business loan, 41 percent with 10 to 19 employeeshad a business loan, 51 percent with 20 to 49 employees had abusiness loan, and 57 percent with 40 to 250 employees had abusiness loan.

While these numbers may partly be explained by the fact that itis more difficult for small businesses to obtain loans, a lack ofneed for loans may also be a reason for these numbers. That is,very small businesses simply may not feel the need to apply forbank loans to run their businesses. They are often more comfortableusing credit cards and other more easily-accessible sources ofcapital

In fact, in a recent report published by LegalShield, “SmallBusiness Survey 2014,” small business owners listed “loans frombanks” as the sixth most common source of capital for theirbusinesses (18%). More commonly, they use personal savings/money(46%), past profits or retained earnings (37%), business creditcards (33%), personal credit cards (22%), and lines of credit frombanks (22%).

General economic uncertainty can also play a role in how easy ordifficult it is to access capital. According to the 2014 PepperdinePrivate Capital Markets Project (PPCMP) Report, nearly everyindustry sector in the private capital markets reported thateconomic uncertainty is the biggest current or emerging issuefacing privately-held businesses. “The cost of economic uncertaintyon the private capital markets and privately-held businesses isnearly incalculable,” said Craig R. Everett, Ph.D., author of thePPCMP report. “However, we know there is a correlation betweeneconomic instability and access to capital. If private capitalmarket providers are anxious, they may hold their pursestringstighter, which will limit access to capital for businesses thatdesperately need additional funding to grow.”

However, as noted earlier, some research suggests that the lackof available capital does not pose a problem for small businessesin specific these days. According to the “September 2014 SmallBusiness Economic Trends,” published by the NFIB, only four percentof small business owners reported that all their credit needs werenot met, which is equal to the record low. Twenty-eight percentreported all credit needs being met, and a record high 55 percentexplicitly said that they did not want a loan. In addition, onlytwo percent reported that financing was their top business problem,compared to 24 percent citing taxes, 19 percent citing regulationsand red tape, and 13 percent citing weak sales. “This is the mostfavorable reading about credit market conditions since 2006,occurring at a time when the Federal Reserve is terminating itsaggressive QE3 policy,” said William Dunkelberg, chief economistfor the NFIB. (“QE3″ is the third round of “quantitative easing”announced by the Federal Reserve.) “Interest rates are low, butprospects for putting borrowed money profitably to work are notgreat, and so loan demand remains weak among small businessowners.”

These observations are also confirmed by LegalShield's “SmallBusiness Survey 2014,” which found that, overall, small businessowners reported less interest in using virtually any sources offunding for their businesses. For example, the use of the numberone source of funds for respondents, “personal savings or personalmoney,” declined from 51 percent in 2013 to 46 percent in 2014. Theuse of the second most common source, “past profits or retainedearnings,” declined from 40 percent in 2013 to 37 percent in 2014.In addition, the sixth most common source, “loans from banks”declined from 19 percent in 2013 to 18 percent in 2014. Overall,virtually all other funding source activities showed a decline from2013 to 2014.

This seems to be a reversal from recent years past, though. InJune 2013, for example, a survey conducted by the AmericanSustainable Business Council found that 45 percent of businessowners who took part in the survey said that access to loans andcredit at reasonable rates was a problem for their business.

And the report published by the NFIB in January 2012, “SmallBusiness, Credit Access, and a Lingering Recession,” cited earlier,noted that the inability to obtain credit was the third mostfrequently-cited finance issue. The report noted, “A disconnectappears between lenders and small business owners. Lenders thinkcredit standards have not changed or have eased over the year.Small business owners think they have tightened.” The report alsonoted that the number of small business owners possessing abusiness loan (not including credit lines or credit cards), fellnoticeably between 2008 and 2011, from 44 percent to 29percent.

So, it seems, at least for the present time, even though accessto capital remains tight, this doesn't seem to be a problem formost small businesses, given that their need for capital seems tobe lower at this point than in the past.