Kauffman Foundation News (4/4/11): Post-recession Challenges For Young Firms in New Kauffman Report
Lost Sales and Tighter Lending Restrictions Challenge Young Firms in Post-Recession Economy, According to Kauffman Study
Despite difficulty obtaining bank loans in 2009, firms increased investments in intangible assets aimed at long-term sustainability, new data show.
The world’s largest longitudinal survey of new businesses identified a marked increase in 2009 in firms being denied bank loans or credit due to tougher lending restrictions–and firms not applying for needed loans because they feared being denied.
Data released today in the sixth follow-up report of the Kauffman Firm Survey (KFS), a Kauffman Foundation-sponsored study of new businesses founded in 2004 and tracked over their early years of existence, showed that 89 percent of firms that were denied loans in 2009 felt that banks’ heightened requirements played a role in their denials. Twenty-one percent of surveyed firms had chosen not to apply for loans for fear of being declined, and 5 percent also refrained from seeking external equity financing for this reason.
Young firms also cited slow and lost sales as their biggest challenge (44 percent), with unpredictable business conditions ranking second.
