I always like when I get to see the latest Bank of America Small Business Owner Report (SBOR) because not only do I learn something new, but there are typically fascinating facts in there that I don’t find anywhere else. That was especially true when I recently got to look at the latest SBOR.



The Small Business Owner Report is a semi-annual survey of 1,000 small business owners that examines the views and insights of business owners. This latest Report covered all sorts of things such as business outlook, hiring trends, economic indicators, and more. One thing that really stood out was the section that took a look at funding.


One particular fact that really caught my eye and made me do a double take was an incredible statistic about business funding. I’ll get to what it was in a moment, but let’s first note up front that when it comes to getting a business funded, small business owners are a resourceful, creative lot, because they need to be. Getting the dream funded is one of the most challenging things that an entrepreneur faces, both in the short-run at the startup phase, in the long-term, and during the more mature growth phase.


Question: How do you think most small businesses get most of their capital at the startup phase? Usually, people say “friends and family” when answering that question, and certainly that is true. For instance, it is a big part of the funding section of my book, The Small Business Bible.


But it turns out that ‘friends and family’ is the wrong answer.


According to this latest Small Business Owner Report, when first getting their business of the ground, the vast majority of entrepreneurs used personal savings (76%). The next most popular sources of funding were:


  • Credit cards. Used by 36% of these new entrepreneurs, followed by
  • Bank loans. Used by 25%. Only then, in 4th place, do we find
  • Friends and family at 21%.


Interestingly, 38% of the respondents said that they had received a financial gift or loan from family and/or friends at some point in the life cycle of their business. One of the fun and different things about the SBOR is that it doesn’t just stop there. These entrepreneurs were also asked how that financial support made them feel. Their answers were enlightening:


  • Grateful – 66%
  • Extra motivated - 39%
  • Anxious – 30%
  • Happy and optimistic - 27%
  • Embarrassed - 23%


While all of these stats are very interesting, I found the lending statistic (of all things) to be the most interesting - the one that gave me the double take.


Click here to read more from small business expert Steve Strauss.


Bank lending is really important because it is where most entrepreneurs turn to for funding as their business becomes more established. After a few years, most small businesses outgrow the friends and family / credit card / personal savings level and need more money to grow bigger and handle increased capacity.


So let me ask you the question: What percentage of small business bank loans do you think were approved in 2016?


  1. 25%?
  2. 60%?
  3. More than 80%?


The correct answer is C.



Yes, that’s right. According to the spring 2016 Bank of America Small Business Owner Report, approval rates for small business loan applications were an astonishing 89%, falling only slightly this fall to 84%. And get this, “While stable, these numbers are the lowest since the question was first posed in fall 2012.”


Roughly 85% of all small business loans were approved. Wow. That flies in the face of urban legends that state that getting a bank loan for a business is very difficult.


But, if you think about it, such approval rates actually make a lot of sense. By the time a business has been around for, say, five years or more, the small business owners know what they are doing. By then, they clearly have come up with a business that serves the market, makes a profit, and has a good foundation. Additionally, by that time, they also usually have established a solid relationship with a bank and/or banker. Combined, this adds up to all sorts of reasons to not only get a loan, but have that loan approved.


And it comes with the added bonus of not having Uncle Chuck ask about his loan at Thanksgiving dinner.


(You can read more of the Small Business Owner Report here.)


About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

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Bank of America, N.A. engages with Steve Strauss to provide informational materials for your discussion or review purposes only. Steve Strauss is a registered trademark, used pursuant to license. The third parties within articles are used under license from Steve Strauss. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


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