Small biz views prepaid as potential funding source

A survey of small U.S. businesses reported merchants are more likely to fund businesses via loans on prepaid debit cards than with payday loans. The National Small Business Association's 2012 Small Business Access to Capital Survey said 13 percent of survey respondents were more inclined to use prepaid cards as a funding tool over the last two years, compared to only 1 percent of respondents who were likely to use payday loans in the same time period.

The online survey of 300 small-business NSBA members, typically with workforces of under 500 employees and annual gross revenues of under $25 million, noted that small businesses continue to struggle to gain financing to grow operations. According to the findings, 43 percent of small-business owners reported the need for funds at some point in the last four years but were unable to secure funding from banks and other sources. Those businesses that were able to find financing in the last 12 months did so via bank loans (43 percent), followed by credit cards (37 percent) and through reinvestment of earnings (32 percent), the survey found.

However, only 2 percent of small businesses reported using prepaid cards and only 1 percent actually employed them as a funding tool in the last 12 months, according to the survey.

But the survey, conducted in May 2012, revealed that 27 percent of respondents had changed banks over the last four years, with 38 percent of them citing mistreatment by banks as being the biggest reason businesses switched. This dissatisfaction with banks suggests prepaid card providers have an opportunity to reach small businesses with loan products tied to prepaid cards.

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