Startup businesses in Colorado and throughout the country are finding it harder to get capital compared to established companies. This is the case even when both startups and mature companies have the same credit profiles. That was a key finding from a Federal Reserve survey that was published on Aug. 8. Despite this, 43 percent of small businesses that had been around for five years or less and had employees were growing revenue. This was compared to just 22 percent of more established small businesses that had employees.
According to one member of the New York Fed, some startup business owners were discouraged from even applying for financing despite a strong demand. Of small business startup owners who replied to the survey, 55 percent said that it was difficult to get a loan while 69 percent had experienced funding shortfalls. Among companies that had been in existence for more than five years, those numbers were 39 percent and 54 percent.
Although newer companies may pose greater risks for lenders, even companies considered low risk had trouble getting financing. The problem exists for newer small companies despite the fact that they account for 20 percent of gross job creation in the United States. It is also estimated that newer small businesses account for one-third of small companies in the country.
Anyone who is thinking about starting a new company may benefit from getting the advice of legal counsel first. A business law attorney may be able to do trademark and patent searches as well as help draw up contracts or other legal documents. Attorneys who have experience in representing start-ups might also point the entrepreneur towards various financing platforms.