New Research from The Milken Institute

Funding the Future: New Report Explores How Businesses Raise Capital

Firms Prefer to Finance Themselves First, Then Turn to Debt

WASHINGTON, DC–(Marketwired – May 13, 2015) – Small and mid-size businesses are the backbone of the American economy, and access to capital is the fuel that lets them thrive.

A unique survey, co-authored by the Milken Institute's Center for Financial Markets (CFM) and the National Center for the Middle Market (NCMM), sampled 636 business owners and C-suite executives to discover present practices for gaining access to capital and to gauge their outlook for growth.



Mapping the markets

The purpose of the research is to map the markets now and reveal opportunities in how companies use their current capital, how providers of capital serve these companies, and how public policy influences the two.

Among the findings in the survey report, "Access to Capital: How Small and Mid-size Businesses are Funding Their Futures":

  • Self-financing is preferred, debt is the second choice, and everything else is a distant third. To the extent that outside capital is needed, businesses strongly prefer bank debt.
  • Expansion is on the horizon. The majority of the surveyed firms plan to grow in the near future, and the cost of capital is no deterrent.
  • Size may bring sophistication. Middle-market firms are more likely than smaller ones to set targets for debt loads, prepare annual budgets, and follow formal processes to evaluating debt strategies and investments.

"This is one of the first studies of access to capital conducted from the standpoint of the people who seek it — the companies and executives — rather than from the point of view of people who provide it," remarks Thomas Stewart, executive director of NCMM. "I hope lenders, investors, and regulators all will be able to play their roles better as a result."

The importance of policy

"A policy environment that encourages effective access to capital is essential to a robust and growing economy," said Brian Knight, associate director of financial policy at CFM. "To work, policy makers need to understand what methods business owners use, what they want to use, and why. I hope this research will help shed light on that question."

Self-financing is preferred, debt is the second choice, and everything else is a distant third

GE Capital, the financial services unit of General Electric, which provides loans to many small and mid-size businesses, emphasizes the importance of this survey. "Understanding where small and middle-market companies are getting capital, but also what they want out of capital providers, is essential," said Maran Nalluswami, senior managing director at GE Capital. "This report is an important contribution to that cause."

"We believe that small businesses need better and easier ways to gain access to capital, and we applaud the work the Milken Institute and the National Center for the Middle Market are doing in this space," said James Hobson, chief operating officer of OnDeck, a lender that's been involved with CFM programs. "By more clearly understanding the issues small businesses face, policymakers and market leaders can better craft solutions to ensure America's small businesses get the financing they need, when they need it."

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About the Milken Institute
The Milken Institute is a nonprofit, nonpartisan think tank determined to increase global prosperity by advancing collaborative solutions that widen access to capital, create jobs and improve health. We do this through independent, data-driven research, action-oriented meetings and meaningful policy initiatives. @milkeninstitute

About the National Center for the Middle Market
Founded in 2011 in partnership with GE Capital and located at The Ohio State University Fisher College of Business, the National Center for the Middle Market (NCMM) is the leading source of knowledge, leadership, and innovative research on the U.S. middle-market economy. The center provides critical data, analysis, insights, and perspectives for companies, policymakers, and other key stakeholders in this sector to help accelerate growth, increase competitiveness, and create jobs. The center's website,, offers a range of tools and resources for middle-market companies.