Are you a health or beauty business owner and thinking about obtaining financing? If yes, then you’re more likely to get it than other small business owners.
Most Creditworthy Businesses
According to The Capital Report prepared by Square in partnership with the Wharton School’s Stevens Center for Innovation in Finance, health and beauty businesses have got the highest (89 on a scale of 0-100) creditworthiness index.
This simply means health and beauty businesses are more eligible to acquire financing than other small businesses.
Whether it is for buying equipment or replenishing working capital, small businesses need financing at some time or other to get going.
Not all the small businesses that apply for obtaining financing get it. Some small businesses get success, while others don’t have the same luck.
Being a creditworthy business, even if you don’t require financing, can certainly boost your confidence in your venture.
Creditworthiness simply is a measure of small businesses’ eligibility to acquire financing. And the creditworthiness index represents average creditworthiness across all small businesses that use Square to process payments.
It ranges from 0-100, where 0 means small businesses are not creditworthy at all and 100 means small businesses are extremely creditworthy.
Overall small business creditworthiness index was 79 as of Sept 2019, which was 1 pointer higher than the same time of the previous year (78).
Some small businesses offering health and beauty services are less prone to the economic crisis. So they are relatively more creditworthy and have the highest creditworthiness index (89) among small businesses.
And small businesses like repair and leisure, where consumer purchase is often optional, have a low creditworthiness index (73).
The location of small businesses doesn’t determine the creditworthiness of businesses. Small businesses situated in rural communities, suburban areas, and urban areas have almost similar creditworthiness index.
You must understand that being creditworthy doesn’t mean you will certainly get financing. This is because many factors determine your access to funding.
Challenges in Accessing Credit
According to Square’s survey, about half of the small businesses didn’t get any or full funding they required in the last 12 months.
In fact, 47% of businesses found it difficult to obtain financing. What’s more, 37% of businesses reckon that getting financing doesn’t seem accessible to them.
Only 51% of businesses were successful in acquiring funding they needed to grow.
There are many reasons why small businesses don’t get credit. Here are some important ones as per the research:
- A short history of business
- Less cash in the bank
- Insufficient collateral
- Low sales of businesses
Small business owners having no access to funding often use their personal credit cards to arrange cash, the research states.
Financing Your Small Business
If you are struggling to get funding for your business, then you should try to figure out hurdles.
Many a time, it is a problem in your idea or presentation, which hinders your progress. Also, you should not look for a large volume of financing at the initial stage of your business.
Revisit your business plan, broaden and diversify funding channels, lower your costs, and get constructive criticisms on your business operations. Doing so can increase your chances of obtaining funding.
Remember, only a few startups and small businesses have been able to secure full funding from their start. For most businesses and startups, it is a long road full of struggles to achieve success.
About the Research
The Capital Report used data of millions of businesses working with Square and survey answers collected from around 1,000 small businesses across the United States. An independent third-party research firm The Harris Poll conducted the survey.
For more details about the report, click here.