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California small businesses still can't grow, survey says

by Chris Hinyub, published

56% of California small business owners say they lack the resources to expand their operations. This according to a report released Wednesday by the Graziadio School of Business and Management at Pepperdine University, which surveyed almost 2,000 California small business owners.

Because most small companies have little in the way of savings (and investment banks aren't lending), proprietors have turned to credit cards as the most sought after source of capital for their businesses, says the report. In the past 12 months, 49% of owners queried tried to raise money with credit cards, 37% said they have tried to get bank loans, and 18% have asked family and friends for monetary help. The survey says only 41% were successful in their attempts.

Without outside help, 49% of California businesses said they will turn their attention to growing revenue from current products or services. This usually means price hikes.

Strong year-over-year Black Friday sales, which grew 6.6 percent to $11.4 billion could be a signal that credit markets are about to loosen up, but according to associate professor of finance and lead researcher at the Pepperdine University Private Capital Markets Project, John Paglia, it's not time to celebrate just yet:

"Small businesses will need sustained consumer demand to recover from losses during the Great Recession. Increased demand and resulting revenue will open up improved access to bank loans and other capital sources, allowing small businesses to execute growth strategies and create jobs."

Other findings by the report:

-  45% of California respondents plan to hire additional employees in the next year.

-  57% of private firms in the state say their hiring plans won't be affected by the American Jobs Act. Only 6% said the legislation will change their plans.

-  Southern California is faring worse than counties to the north. The average change in revenues decreased by 2% in SoCal, but grew 1% for companies in Northern California.

To read the full report, click here.

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