A Quick Study of the Six Common Sources of Business Capital

By John Panaccione
CEO, LogicBay

Under a different program, the same grant source awarded grants to another 7 companies averaging just under $50,000. This was out of 185 applicants, which puts the success rate of just under 4%.  Collectively, that means 371 companies are still looking for capital.

I call it the “Powerball Syndrome.” When we hear that a handful of companies “won,” we all want to be the next lottery winner but the odds just don’t stack up in our favor. The grant program to which I’m referring is an excellent program but according to the national statistics collected by Morrison and Company,  less than 1% of small businesses receive grants.

Now that we’ve already covered grants, let’s take a look at the other common sources of small business capital.



Large banks approve approximately 25% of commercial loan applications. Small banks do better at just under 50%. However, the reality of these statistics is that these approval rates are reflective of loans applied for by entrepreneurs that were actually encouraged to apply by loan officers. The ratio that’s missing is how many small business owners were turned away before even applying. I know a few entrepreneurs – me included – that were literally laughed at when first approaching a bank. Still, most first-time entrepreneurs seem to consider banks their best funding option. Luckily, it’s not the only one.


The number of innovative financial technology companies has exploded since the financial crisis of 2008. Fintech rushed in to fill the void that was created when traditional funding sources, that existed prior to 2008, dried up. Making that void even greater were the Dodd-Frank regulations that came online as a response to the crisis. Investments in Fintech went from $100M in 2008 to $19B in 2017. While this capital is more easily attainable for small business owners, it’s expensive. No industry-wide approval rates on Fintech applications were available but we do know the average Fintech loan is approximately $147,000 with interest rates somewhere between 12% and 20%. Obviously, the money’s available but very costly. 

Angel Investors:

In 1934, the Securities and Exchange Commission began to regulate how securities could be offered and sold. This left most of us, the non-accredited investors, unable to invest in private companies. However, accredited investors – either as individuals or as groups – look at new companies for potential investment. This is the “Shark Tank” model and good luck getting funded. Most angels or groups look at hundreds of companies and fund an average of 2% of those companies per year. In 2017, the average angel investment was just south of $284,000. Yet, we hear about the few that make the cut and think, “that could be us!” Remember the Powerball Syndrome I mentioned earlier? Unfortunately, according to the numbers, it probably isn’t happening.


Venture Capital (VCs):

This one’s easy. The average size VC deal in North Carolina was $11.3M in 2017.  If you need less than $5M, they won’t even want to talk to you. So, for the sake of earlier stage small business owners and entrepreneurs, we won’t talk about them here.

Equity Crowdfunding:

As a result of the NC PACES Act, equity crowdfunding is the newest way for small businesses to raise up to $2M in North Carolina. The very first North Carolina intrastate crowdfunding offering was recently announced but while it’s a new option for North Carolina businesses, it’s a proven success on the national front. In fact, 66% of the small businesses that used Regulation CF (the Federal crowdfunding option) successfully raised their minimum amount of capital. Equity crowdfunding is also unique in the fact that it allows entrepreneurs to define their own terms to investors. In addition, it provides an opportunity for non-accredited investors who live in North Carolina to invest in local companies. The benefit to both issuers and investors make this an extremely exciting option.

Regardless of which options you choose, raising capital all comes down to how much you need and which source or sources of capital offer you the greatest chance of success at the lowest cost.

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