TABLE 17.-Purposes for which funds are needed, by size of business

1 The number of purposes for which funds are needed is larger than the number of respondents because some respondents suggested 2 or more purposes.

TABLE 18.-Purpose for which funds are needed

The respondents to the questionnaire who indicated that they were in immediate need of funds generally stated the amount desired, but the data were not given in a form which permits us to present a total-in fact, such an amount, if it had been given for this group, would not be significant. A distribution of respondents on the basis of amount needed is interesting. Forty-six percent needed less than $75,000; 67 percent less than $150,000; 80 percent less than $250,000, and 95 percent less than a million dollars. Table 19 and chart XI show the distribution according to (number and percent) the amounts needed.

Of the firms needing less than $50,000, 31 percent wished to obtain funds through commercial loans, while 53 percent preferred term loans. (See table 15.) The larger the company the greater the tendency to rely on bonds and mortgages and the sale of stock. It is interesting to observe that only 2 percent of those wanting less than $50,000 preferred the sale of stock as compared with 23 percent of those who needed $150,000 or more.

These data seem to support the contention of those who believe that the smaller companies which need funds prefer to borrow rather than to sell shares. It is also clear that there is an over-all preference among this group for term loans. This is probably due to the fact that term loans are made for a longer period of time than that for commercial loans and may be used to postpone or avoid the sale of stock. They give the borrower an opportunity to carry out his financial program without dividing the ownership and control.

The largest number of the respondents who were in need of funds had 100 employees or less. The smaller the firm (based on number of employees) the smaller was the amount of funds wanted. Practically all respondents with more than 250 employees wanted $150,000 or more. A complete breakdown of the needs for funds based on the number of employees is given in table 20.

TABLE 20.-Amount of funds needed, by size of business

V. THE PROBLEMS OF FINANCING SMALL BUSINESS (CONCLUDED)

Financing business enterprise 24

Business enterprises, if properly financed, need or require various types of funds which may be classified as follows: (1) short-term, (2) term loans or working capital or intermediate capital, and (3) permanent funds including equity funds and long-term bonds.

(1) Short-term loans are those which are obtained by business and usually run from 3 to 6 months but in some cases may extend for much longer periods. Trade credit granted by suppliers usually run for 30 to 90 days. The funds obtained from short-term loans are generally used to meet payrolls and other current operating expenses, including the payment or discounting of bills, restocking or maintaining of inventories, or financing other current operations.

24 The next few pages are intended to set forth the types of funds required by small-business enterprises, a brief description of the generally acknowledged sources for various types of funds including short-term or commercial loans, intermediate loans, the sale of mortgages or bonds and equity capital. Following this brief discussion, there will be presented the point of view of the industrialists regarding the sources and obstacles to small business financing and the reasons given by these manufacturers for the nonavailability of funds.