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