PCA Index Survey Responses First Quarter 2012

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1 PCA Index Survey Responses First Quarter 2012 John K. Paglia, Ph.D., CFA, CPA Associate Professor of Finance Director, Pepperdine Private Capital Markets Project 2012 Pepperdine University. All rights reserved. Pepperdine Private Capital Access Index ( PCA Index ) is a trademark of Pepperdine University. PCA Index content is the intellectual property of Pepperdine University or its third party content providers. Any copying, republication or redistribution of PCA Index content, including but not limited to caching, framing or similar means, is expressly prohibited without the prior written consent of Pepperdine University. Pepperdine University shall not be liable for any errors, omissions or delays in PCA Index content, or for any actions taken in reliance thereon.

2 This research was made possible with the support of Dun & Bradstreet Credibility Corp., the leading provider of credit building and credibility solutions for businesses. DUN & BRADSTREET CREDIBILITY CORP. Jeffrey Stibel, Chair and Chief Executive Officer Judy Hackett, Chief Marketing Officer Aaron Stibel, Senior Vice President, Technology Erik Simon, Director, Marketing and Communications Brenda Gary, Senior Marketing Director Bernice Brennan, Manager, Creative Services & Marketing Communications Trenice Taylor, Marketing Manager

3 ACKNOWLEDGEMENTS I d also like to thank the following people at The Graziadio School of Business and Management for their contributions: Dean Linda Livingstone Associate Dean David M. Smith Mike Sims, Executive Officer, CER Douglass Gore, Director of Public Relations Mark Chun, Director, Center for Applied Research Bill Bleuel, Professor of Decision Sciences Irina Shaykhutdinova, Research Analyst Sean Gray, Graduate Assistant and consultant, Simon James, Ph.D.

4 Outline I. About the Private Capital Access (PCA) Index II. Current demand/need for external financing...7 III. Accessibility/success rate of raising new capital IV. Satisfaction rates for various capital sources V. Expected demand for external financing VI. Expected capital access (success) rates...31 VII. Hiring plans and impacts of unsuccessful financing...37 VIII. Jumpstart Our Business Startups (JOBS) Act IX. Financing conditions by state X. About the respondents

5 I. About the Private Capital Access (PCA) Index The Pepperdine Private Capital Access Index (PCA) is a quarterly indicator produced by the Graziadio School of Business and Management at Pepperdine University, and with the support of Dun & Bradstreet Credibility Corp. The index is designed to measure the demand for, activity, and health of the private capital markets. The purpose of the PCA Index is to gauge the demand of small and medium-sized businesses for financing needs, the level of accessibility of private capital, and the transparency and efficiency of private financing markets. 5

6 About the Q Private Capital Access (PCA) Index Survey 25 questions Invite to participate distributed to sample from Dun & Bradstreet Credibility Corp. s business database 5,977 completed responses Where relevant, responses are segmented by revenues sizes (<$5 million; $5 million to $100 million) Responses collected from Apr. 3 Apr. 10 6

7 II. Current demand/need for external financing 7

8 Demand for Financing by Purpose and Size (% with any need reported) 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Planned growth or expansion, including acquisitions (not yet realized) Working capital fluctuations Growth due to increased demand (already realized) Finance worsening operating conditions Refinance existing loans or equity Withdraw wealth for owners Whole sample 66.1% 65.3% 56.0% 40.9% 38.4% 27.5% < $5 million 52.0% 56.4% 47.2% 32.5% 26.6% 22.6% $5 $100 million 53.4% 52.0% 46.5% 25.8% 27.2% 23.1% 8

9 Strength of Demand for Financing (among those indicating demand) Scale 1 4: slight, moderate, high, extremely high need Planned growth or expansion, including acquisitions (not yet realized) Working capital fluctuations Growth due to increased demand (already realized) Finance worsening operating conditions Refinance existing loans or equity Withdraw wealth for owners Whole sample < $5 million $5 $100 million

10 Respondents Indicating High and Extremely 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% High Demand for Financing (among those indicating demand) Planned growth or expansion, including acquisitions (not yet realized) Working capital fluctuations Growth due to increased demand (already realized) Finance worsening operating conditions Refinance existing loans or equity Withdraw wealth for owners Whole sample 47.3% 36.8% 34.2% 35.2% 42.4% 25.0% < $5 million 46.0% 36.7% 33.2% 35.2% 43.3% 23.9% $5 $100 million 43.8% 31.7% 34.2% 26.9% 37.7% 26.5% 10

11 Percentage Indicating Yes to Is the current business financing environment restricting 100% 80% 60% 61% 64% 47% 51% 55% 32% 40% 20% 0% Growth opportunities for your business? Your ability to hire new employees? Whole sample < $5 million $5 $100 million 11

12 Trade Accounts (Accounts Receivable) Payment Period Trends Over the Past Three Months 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 8% 8% 8% Accelerated (receiving payments from customers faster than three months ago) 36% 37% 30% Slowed (receiving payments from customers slower than three months ago) 63% 56% 55% Stayed the same Whole sample < $5 million $5 million $100 million 12

13 Percentage of Respondents Who Attempted to Raise Outside Financing in the Last 6 Months 100% 80% 60% 40% 32% 32% 39% 20% 0% Whole sample < $5 million $5 $100 million 13

14 III. Accessibility/success rate 14

15 Is it Difficult or Easy to Raise New External Financing? Equity financing Debt financing 100% 80% 60% 40% 20% 0% Difficult Neither Easy difficult nor easy Whole sample 74% 14% 12% < $5 million 77% 14% 10% $5 $100 million 64% 18% 18% 100% 80% 60% 40% 20% 0% Difficult Neither Easy difficult nor easy Whole sample 74% 12% 14% < $5 million 77% 11% 11% $5 $100 million 58% 15% 27% 15

16 Financing Success Rates by Type and Business 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Friends and family Grants (SBIR, STTR, etc.) Crowd funding Size for Prior Six Months Trade credit Credit card pers. Loan pers. Credit card biz. Lease Whole sample 71% 24% 7% 64% 62% 48% 59% 59% 45% 14% 20% 31% 20% 8% 17% 9% 2% < $5 million 73% 23% 8% 63% 62% 48% 56% 56% 36% 12% 12% 31% 16% 7% 12% 4% 1% $5 $100 million 88% 46% 9% 84% 73% 59% 81% 83% 76% 32% 53% 54% 33% 23% 46% 30% 15% Bank loan biz. CDFI/ Credit union Asset based lender Factor Angel capital Vent. capital Private equity group Mezz. lender Hedge fund 16

17 Main Purpose for Raising or Attempting to Raise 100% 80% 60% 40% 20% 0% Growth or expansion (incl. acquis.) Working capital fluctuations Financing Refinancing existing loans or equity Replacing equipment or facilities unrelated to growth or expansion Finance worsening operations conditions Withdraw wealth for owners Whole sample 42% 29% 12% 6% 6% 1% 5% < $5 million 38% 32% 11% 6% 7% 1% 4% $5 $100 million 49% 21% 16% 7% 2% 1% 4% Other 17

18 Reasons for Businesses Not Attempting to Raise 100% External Financing (Multiple Selections) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Enough cash flow Sufficient financing in place Weak economy Business would be rejected Lack of expertise Not enough time Loss of control / flexibility Waiting for cheaper financing Cease operation / liquidate Whole sample 45% 25% 23% 22% 13% 12% 6% 8% 2% 7% < $5 million 44% 22% 25% 25% 15% 13% 6% 8% 1% 6% $5 $100 million 58% 44% 14% 10% 3% 4% 5% 5% 0% 4% Other 18

19 Percentage of Owners Who Transferred Personal Assets to Business Over Prior Six Months 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 74% 57% 53% 42% 46% 25% 1% 1% Yes No Unsure Whole sample < $5 million $5 $100 million 1% 19

20 Type of Personal Assets Transferred to Business During Prior Six Months (Multiple Selections) 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Personal savings / investments Personal credit card purchases Personal loan Cash from the sale of personal assets Home equity loan Whole sample 68.1% 39.4% 33.6% 17.1% 12.1% 4.0% < $5 million 67.7% 40.2% 33.6% 17.4% 12.6% 3.6% Other $5 $100 million 68.4% 30.1% 34.2% 10.4% 15.5% 3.1% 20

21 IV. Satisfaction rates 21

22 Pricing and Contract Terms Satisfaction Rates 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Friends and family (for those with a successful raise) Grants (SBIR, STTR, etc.) Crowd funding Trade credit Credit card pers. Loan pers. Credit card biz. Lease Whole sample 89% 89% 70% 83% 45% 69% 61% 78% 82% 85% 71% 50% 80% 67% 64% 58% 67% Bank loan biz. CDFI/ Credit union Asset based lender Factor Angel capital Vent. capital Private equity group Mezz. lender Hedge fund 22

23 General Financing Process Satisfaction Rates 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Friends and family Grants (SBIR, STTR, etc.) Crowd funding Trade credit Credit card pers. (by Outcome) Loan pers. Credit card biz. Lease Successful 74% 70% 80% 80% 59% 62% 73% 79% 71% 76% 67% 65% 65% 63% 74% 67% 50% Unsuccessful 30% 11% 7% 23% 13% 14% 17% 14% 8% 10% 8% 9% 17% 15% 14% 11% 8% Bank loan biz. CDFI/ Credit union Asset based lender Factor Angel capital Vent. capital Private equity group Mezz. lender Hedge fund 23

24 Percentage of Those Satisfied with the Amount of Time Elapsed from Point of First Contact until 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Funds Were Received (for those successful Friends and family Grants (SBIR, STTR, etc.) Crowd funding Trade credit Credit card pers. Loan pers. raises) Credit card biz. Lease Whole sample 78% 58% 44% 79% 71% 65% 81% 82% 71% 70% 61% 67% 59% 53% 55% 67% 67% Bank loan biz. CDFI/ Credit union Asset based lender Factor Angel capital Vent. capital Private equity group Mezz. lender Hedge fund 24

25 Percentage of Those Unsuccessful Who Feel the General Category of Financing is a Still a Good 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Friends and family Grants (SBIR, STTR, etc.) Crowd funding Fit for Their Business Trade credit Credit card pers. Loan pers. Credit card biz. Lease Whole sample 28% 57% 33% 62% 34% 47% 59% 52% 67% 62% 52% 37% 62% 57% 58% 37% 39% Bank loan biz. CDFI/ Credit union Asset based lender Factor Angel capital Vent. capital Private equity group Mezz. lender Hedge fund 25

26 V. Expected demand for external financing 26

27 Percentage of Businesses that Are Planning to Raise Financing in the Next Six Months 100% 80% 60% 47% 46% 52% 40% 31% 32% 31% 22% 23% 17% 20% 0% Yes No Unsure Whole sample < $5 million $5 million $100 million 27

28 Percentage of Respondents Indicating Demand for New Financing in the Next Six Months 100% 80% 60% 40% 20% 0% Planned future growth or expansion Expected working capital fluctuations Growth due to expected increased demand Expected worsening operating conditions Refinance existing loans or equity Withdraw wealth for owners Whole sample 63% 61% 59% 35% 36% 25% < $5 million 64% 63% 60% 38% 37% 25% $5 million $100 million 61% 55% 56% 25% 35% 25% 28

29 Strength of Expected Demand for New External Financing in the Next Six Months (Scale 1 4: Slight, Moderate, High, Extremely High) Planned future growth or expansion Expected working capital fluctuations Growth due to expected increased demand Expected worsening operating conditions Refinance existing loans or equity Withdraw wealth for owners Whole sample < $5 million $5 million $100 million

30 Respondents Indicating High or Extremely High Expected Demand for New External Financing in 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% the Next Six Months Planned future growth or expansion Expected working capital fluctuations Growth due to expected increased demand Expected worsening operating conditions Refinance existing loans or equity Withdraw wealth for owners Whole sample 45.9% 37.1% 38.6% 27.5% 43.6% 24.2% < $5 million 44.5% 36.7% 37.4% 26.3% 43.8% 23.9% $5 million $100 million 40.3% 29.6% 32.7% 19.6% 41.0% 20.6% 30

31 VI. Expected access rates 31

32 Do You Expect It Would Be Easy or Difficult to Raise New Financing in the Next Six Months? Equity financing Debt financing 100% 80% 60% 40% 20% 0% Difficult Neither Easy difficult nor easy Whole sample 71% 12% 17% < $5 million 74% 12% 14% $5 $100 million 56% 17% 27% 100% 80% 60% 40% 20% 0% Difficult Neither Easy difficult nor easy Whole sample 69% 11% 20% < $5 million 74% 10% 16% $5 $100 million 50% 16% 34% 32

33 Likely Sources of Financing 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Friends and family Grants (SBIR, STTR, etc.) Crowd funding Trade credit Credit card pers. Loan pers. Credit card biz. Whole sample 32% 29% 35% 10% 22% 32% 40% 33% 68% 36% 35% 17% 30% 26% 28% 14% Lease Bank loan biz. CDFI/ Credit union Asset based lender Factor Angel capital Vent. capital Private equity group Mezz. lender 33

34 Main Purpose for Raising Expected Financing 100% 80% 60% 40% 20% 0% Growth or expansion (incl. acquisition) Working capital fluctuations Refinancing existing loans or equity Replacing equipment or facilities unrelated to growth or expansion Finance worsening operations conditions Withdraw wealth for owners Whole sample 58% 21% 9% 5% 3% 1% 3% < $5 million 57% 22% 9% 6% 3% 1% 3% $5 $100 million 59% 19% 10% 6% 2% 2% 1% Other 34

35 Level of Confidence for Successful Financing (Scale 0 4: none; some; moderately; very; completely) Friends and family Grants (SBIR, STTR, etc.) Crowd funding Trade credit Credit card pers. Loan pers. Credit card biz. Lease Whole sample < $5 million $5 $100 million Bank loan biz. CDFI/ Credit union Asset based lender Factor Angel capital Vent. capital Private equity group Mezz. lender Hedge fund 35

36 Reasons for Not Planning on Raising Financing 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Enough cash flow Sufficient financing in place Weak economy Business would be rejected Lack of expertise Not enough time Loss of control / flexibility Waiting for cheaper financing Cease operation / liquidate Whole sample 61% 37% 19% 13% 6% 6% 5% 4% 2% 5% < $5 million 59% 33% 22% 16% 7% 7% 6% 5% 2% 5% $5 $100 million 72% 54% 9% 4% 1% 2% 2% 2% 0% 3% Other 36

37 VII. Hiring plans and impacts of unsuccessful financing attempt 37

38 Number of Employees Planned to Be Hired in 40% 35% 30% 25% 20% 15% 10% 5% 0% the Next Six Months More than 200 Whole sample 31% 34% 19% 8% 3% 2% 1% 1% 1% 0% 0% 0% 0% < $5 million 33% 37% 17% 7% 2% 1% 1% 0% 0% 0% 0% 0% 0% $5 million $100 million 16% 24% 26% 12% 5% 6% 3% 2% 2% 1% 1% 1% 1% 38

39 Impacts of Unsuccessful Financing Event in the Next Six Months for Those Planning to Raise 100% 80% 60% 40% 20% 0% Capital (Multiple selections) Slower business growth Hire fewer new employees than planned Reduce number of employees (layoffs) Sell business assets or shut down No expected impacts on growth, business size, or hiring plans Whole sample 73% 58% 23% 24% 11% < $5 million 74% 60% 22% 25% 10% $5 million $100 million 76% 60% 28% 13% 11% 39

40 VIII. Jumpstart Our Business Startups (JOBS) Act 40

41 Has the passing of the JOBS Act increased the likelihood that business owners will raise capital via crowdfunding? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 61% 53% 51% 45% 47% 3% 3% 2% Yes No Unsure Whole sample < $5 million $5 million $100 million 37% 41

42 Has the passing of the JOBS Act increased the likelihood that business owners will raise capital via IPO or has it accelerated plans already in place for an IPO? 100% 80% 76% 76% 82% 60% 40% 20% 1% 1% 1% 1% 1% 0% 23% 23% 17% 0% Yes increased likelihood of an IPO Yes accelerated plans already in place for an IPO No Unsure Whole sample < $5 million $5 million $100 million 42

43 Ranking of aspects of JOBS Act (in terms of perceived cost savings) that have made an IPO exit more appealing 100% 80% 60% 40% 20% 40% 48% 12% 30% 32% 39% 18% 24% 59% 0% Exempted from requirements of hiring an outside auditing firm to check internal financial controls Only two years of audited financial statements required for filing rather than three Exempted from Dodd Frank rules that give shareholders non binding votes on executive compensation Most important Moderately important Least important 43

44 IX. Financing Conditions by State 44

45 Sample Size by State State Sample Size State Sample Size State Sample Size California 835 Massachusetts 116 Idaho 46 Texas 427 Wisconsin 109 Arkansas 42 Florida 347 Oregon 101 Montana 37 New York 290 Indiana 91 Nebraska 36 Illinois 258 Missouri 90 Mississippi 33 Pennsylvania 208 Tennessee 90 Maine 31 Ohio 199 Connecticut 76 New Hampshire 28 Georgia 192 Nevada 76 Alaska 26 Virginia 175 Alabama 71 District of Columbia 24 Michigan 174 New Mexico 65 Delaware 23 Colorado 173 South Carolina 65 Hawaii 23 Arizona 170 Utah 65 Rhode Island 20 Washington 170 Kansas 61 West Virginia 20 New Jersey 164 Louisiana 57 Wyoming 20 North Carolina 146 Iowa 55 Vermont 18 Maryland 123 Oklahoma 52 South Dakota 17 Minnesota 122 Kentucky 48 North Dakota 11 45

46 Demand for Financing due to Planned Growth by State (% with any need reported) State Rank % State Rank % State Rank % Oklahoma % Texas % Arizona % South Dakota % Virginia % Massachusetts % Delaware % California % Montana % North Dakota % Alabama % Washington % South Carolina % Ohio % Utah % Florida % Michigan % Rhode Island % New Mexico % Indiana % Iowa % Georgia % Colorado % Louisiana % Vermont % Mississippi % Pennsylvania % New Jersey % New Hampshire % Tennessee % Kentucky % Missouri % Oregon % Nevada % Minnesota % Idaho % Wyoming % Connecticut % West Virginia % Kansas % Illinois % Nebraska % District of Columbia % New York % Arkansas % North Carolina % Alaska % Maine % Maryland % Wisconsin % Hawaii % 46

47 Demand for Financing due to Increased Sales by State (% with any need reported) State Rank % State Rank % State Rank % Delaware % Virginia % Mississippi % North Dakota % Michigan % Indiana % South Dakota % Washington % Montana % South Carolina % Maryland % Arizona % Florida % District of Columbia % Utah % Oklahoma % Massachusetts % Iowa % Nevada % New Jersey % Vermont % Kentucky % Colorado % Nebraska % Texas % Wyoming % Arkansas % Rhode Island % Illinois % Kansas % North Carolina % Minnesota % Alabama % California % Missouri % Maine % Georgia % Wisconsin % Louisiana % New Mexico % Connecticut % Idaho % Ohio % Oregon % Alaska % Tennessee % Pennsylvania % Hawaii % New York % New Hampshire % West Virginia % 47

48 Percentage Indicating Yes to Is the current business financing environment restricting growth opportunities by State State Rank % State Rank % State Rank % Nevada % Arizona % Pennsylvania % New Mexico % Illinois % Missouri % Maryland % District of Columbia % West Virginia % Florida % Hawaii % Oklahoma % Virginia % Mississippi % Washington % Delaware % Utah % Kentucky % North Carolina % Indiana % North Dakota % California % Idaho % Iowa % Georgia % Montana % Kansas % South Carolina % Rhode Island % Vermont % New Jersey % Michigan % Tennessee % Alabama % Connecticut % Alaska % Oregon % Louisiana % Arkansas % Wyoming % Maine % Minnesota % Massachusetts % New York % New Hampshire % Texas % Wisconsin % South Dakota % Colorado % Ohio % Nebraska % 48

49 Percentage Indicating Yes to Is the current business financing environment restricting ability to hire by State State Rank % State Rank % State Rank % North Dakota % Texas % Kansas % District of Columbia % New York % Oklahoma % South Carolina % Massachusetts % Montana % New Mexico % North Carolina % New Hampshire % Virginia % Arizona % Utah % Nevada % Rhode Island % Michigan % Florida % Louisiana % Missouri % Colorado % Washington % Kentucky % Georgia % Mississippi % Minnesota % Idaho % Ohio % South Dakota % California % Delaware % West Virginia % Maine % Wyoming % Iowa % Maryland % Indiana % Hawaii % Oregon % Wisconsin % Arkansas % Alabama % Tennessee % Vermont % New Jersey % Connecticut % Alaska % Illinois % Pennsylvania % Nebraska % 49

50 Percentage Indicating Shortened Receivable Payment Periods Over the Past Three Months State Rank % State Rank % State Rank % Idaho 1 19% Arkansas 18 8% West Virginia 35 6% Nebraska 2 19% California 19 8% District of Columbia 36 5% Delaware 3 18% Colorado 20 8% Hawaii 37 5% South Dakota 4 15% Connecticut 21 8% Oklahoma 38 5% North Carolina 5 12% Louisiana 22 8% Oregon 39 5% Maryland 6 11% New Hampshire 23 8% Rhode Island 40 5% Michigan 7 11% New York 24 8% Alaska 41 4% Tennessee 8 11% Texas 25 8% Maine 42 4% Illinois 9 10% Missouri 26 7% Mississippi 43 4% Indiana 10 10% Pennsylvania 27 7% South Carolina 44 4% Kentucky 11 10% Washington 28 7% New Mexico 45 3% Massachusetts 12 10% Arizona 29 6% Utah 46 3% Florida 13 9% Georgia 30 6% Iowa 47 2% New Jersey 14 9% Kansas 31 6% Montana 48 0% Virginia 15 9% Minnesota 32 6% North Dakota 49 0% Wisconsin 16 9% Nevada 33 6% Vermont 50 0% Alabama 17 8% Ohio 34 6% Wyoming 51 0% 50

51 Percentage Indicating Slowed Receivable Payment Periods Over the Past Three Months State Rank % State Rank % State Rank % Wyoming 1 58% Arizona 18 39% Kansas 35 31% Alabama 2 51% Connecticut 19 39% Texas 36 31% Vermont 3 50% Nevada 20 39% Indiana 37 30% New Hampshire 4 46% New Jersey 21 38% Arkansas 38 29% Louisiana 5 44% New York 22 38% Wisconsin 39 29% Montana 6 44% California 23 37% Maryland 40 28% Oregon 7 44% Georgia 24 36% Michigan 41 28% South Carolina 8 44% Ohio 25 35% Minnesota 42 26% Utah 9 43% West Virginia 26 35% Rhode Island 43 26% New Mexico 10 42% Missouri 27 34% Delaware 44 24% Colorado 11 41% Oklahoma 28 34% Maine 45 24% Hawaii 12 41% Virginia 29 34% Kentucky 46 21% Florida 13 40% Alaska 30 33% North Dakota 47 20% Massachusetts 14 40% Washington 31 33% Iowa 48 19% Mississippi 15 40% Idaho 32 32% Nebraska 49 19% Pennsylvania 16 40% North Carolina 33 32% District of Columbia 50 15% Tennessee 17 40% Illinois 34 31% South Dakota 51 15% 51

52 Percentage of Respondents Who Attempted to Raise Outside Financing in the Last 6 Months by State State Rank % State Rank % State Rank % North Dakota 1 64% Georgia 18 33% North Carolina 35 30% South Dakota 2 47% Pennsylvania 19 33% Minnesota 36 29% Oklahoma 3 46% Vermont 20 33% Louisiana 37 28% Rhode Island 4 45% Colorado 21 32% Mississippi 38 27% New Hampshire 5 43% Connecticut 22 32% Ohio 39 27% Arizona 6 41% Indiana 23 32% Arkansas 40 26% New Mexico 7 38% Nevada 24 32% Maine 41 26% South Carolina 8 37% Utah 25 32% Michigan 42 26% Massachusetts 9 36% Wisconsin 26 32% West Virginia 43 25% California 10 35% Alabama 27 31% Wyoming 44 25% Hawaii 11 35% Alaska 28 31% Iowa 45 24% New Jersey 12 35% Kentucky 29 31% Kansas 46 23% Virginia 13 35% New York 30 31% Missouri 47 23% Illinois 14 34% Tennessee 31 31% Oregon 48 23% Texas 15 34% Delaware 32 30% Nebraska 49 22% Washington 16 34% Idaho 33 30% Montana 50 19% Florida 17 33% Maryland 34 30% District of Columbia 51 17% 52

53 Percentage of Owners Who Transferred Personal Assets to Business Over Prior Six Months by State State Rank % State Rank % State Rank % Nevada 1 56% Delaware 18 43% West Virginia 35 37% Wyoming 2 55% Hawaii 19 43% Missouri 36 36% South Carolina 3 54% Minnesota 20 43% Montana 37 35% Colorado 4 50% Washington 21 43% Indiana 38 34% Arizona 5 49% District of Columbia 22 42% Maryland 39 34% Virginia 6 49% Pennsylvania 23 42% Alabama 40 33% Kentucky 7 48% Texas 24 42% Iowa 41 33% New Jersey 8 48% Maine 25 41% New Hampshire 42 32% Oklahoma 9 48% Massachusetts 26 41% Wisconsin 43 32% Florida 10 47% Mississippi 27 41% Michigan 44 29% California 11 46% Connecticut 28 40% Arkansas 45 28% Georgia 12 46% Illinois 29 40% Nebraska 46 28% New Mexico 13 45% Louisiana 30 40% Vermont 47 28% North Dakota 14 45% North Carolina 31 40% Idaho 48 27% New York 15 44% Ohio 32 40% Alaska 49 25% Oregon 16 44% Tennessee 33 38% Kansas 50 24% Utah 17 44% Rhode Island 34 37% South Dakota 51 24% 53

54 Percentage of Respondents Indicating Demand for New Financing due to Planned Growth in the Next Six Months by State State Rank % State Rank % State Rank % North Dakota % North Carolina % Alabama % South Carolina % Ohio % Connecticut % South Dakota % Arizona % Idaho % Delaware % Kansas % Utah % Wyoming % Michigan % New Hampshire % Alaska % Colorado % Louisiana % New Mexico % New York % Pennsylvania % Virginia % Indiana % Missouri % Florida % Kentucky % West Virginia % Georgia % Mississippi % Tennessee % District of Columbia % Massachusetts % Arkansas % California % Minnesota % Vermont % Nevada % Washington % Nebraska % Oklahoma % Oregon % Hawaii % New Jersey % Illinois % Rhode Island % Texas % Montana % Iowa % Maryland % Wisconsin % Maine % 54

55 Percentage of Respondents Indicating Demand for New Financing due to Expected Increased Sales in the Next Six Months by State State Rank % State Rank % State Rank % Delaware % Ohio % Pennsylvania % North Dakota % Maryland % Connecticut % South Carolina % New Jersey % Oregon % Mississippi % North Carolina % Kansas % Oklahoma % Colorado % Nebraska % Florida % New York % Alaska % Virginia % Idaho % Indiana % New Mexico % Minnesota % Alabama % Texas % Arizona % Arkansas % District of Columbia % Washington % Rhode Island % Wyoming % Massachusetts % West Virginia % Nevada % Tennessee % Louisiana % California % Missouri % Vermont % Kentucky % Wisconsin % Hawaii % Georgia % Utah % Montana % South Dakota % Illinois % Iowa % Michigan % New Hampshire % Maine % 55

56 Percentage of Respondents Planning to Hire New Employees in the Next Six Months by State State Rank % State Rank % State Rank % North Dakota 1 82% Rhode Island 18 70% Colorado 35 65% District of Columbia 2 79% Virginia 19 70% Vermont 36 65% Oklahoma 3 79% Illinois 20 69% Alaska 37 64% Kentucky 4 77% Kansas 21 69% Connecticut 38 64% New Hampshire 5 77% Louisiana 22 69% Mississippi 39 64% New Jersey 6 74% New York 23 69% North Carolina 40 64% Utah 7 74% Texas 24 69% Wisconsin 41 64% Arizona 8 73% California 25 68% Nevada 42 63% Delaware 9 73% Hawaii 26 68% Iowa 43 62% Maryland 10 73% Minnesota 27 68% Massachusetts 44 62% Florida 11 72% Tennessee 28 68% South Dakota 45 62% Georgia 12 72% Washington 29 68% Alabama 46 59% Ohio 13 72% Wyoming 30 68% Nebraska 47 58% Missouri 14 71% Indiana 31 67% Arkansas 48 55% Oregon 15 71% Idaho 32 66% Maine 49 53% Michigan 16 70% New Mexico 33 66% Montana 50 50% Pennsylvania 17 70% South Carolina 34 66% West Virginia 51 37% 56

57 Percentage of Businesses Who Indicated Slower Business Growth as a Result of Unsuccessful Financing Event in the Next Six Months by State State Rank % State Rank % State Rank % Delaware 1 100% Texas 18 77% New York 35 67% Vermont 2 100% Hawaii 19 75% North Dakota 36 67% Arkansas 3 88% Oklahoma 20 75% Wyoming 37 67% Maine 4 83% California 21 74% Kansas 38 64% Missouri 5 83% Virginia 22 74% Maryland 39 64% Arizona 6 82% Illinois 23 73% Michigan 40 64% Florida 7 81% Pennsylvania 24 73% District of Columbia 41 63% North Carolina 8 80% Colorado 25 72% Minnesota 42 63% Indiana 9 79% Ohio 26 70% Iowa 43 60% Nevada 10 79% Massachusetts 27 69% Alabama 44 59% Mississippi 11 78% New Mexico 28 68% Connecticut 45 53% Oregon 12 78% South Carolina 29 68% South Dakota 46 50% Utah 13 78% Tennessee 30 68% West Virginia 47 50% Washington 14 78% Wisconsin 31 68% Kentucky 48 47% Georgia 15 77% Idaho 32 67% New Hampshire 49 44% Louisiana 16 77% Montana 33 67% Alaska 50 36% New Jersey 17 77% Nebraska 34 67% 57

58 Percentage of Businesses Who Indicated Hiring Fewer Employees as a Result of Unsuccessful Financing Event in the Next Six Months by State State Rank % State Rank % State Rank % Mississippi 1 78% Missouri 18 61% Arkansas 35 50% Kentucky 2 73% Washington 19 61% District of Columbia 36 50% Delaware 3 71% Iowa 20 60% Kansas 37 50% Pennsylvania 4 70% New Jersey 21 60% Nebraska 38 50% Tennessee 5 68% Vermont 22 60% West Virginia 39 50% Idaho 6 67% California 23 59% Colorado 40 49% Maine 7 67% Ohio 24 58% Minnesota 41 47% Massachusetts 8 67% Oklahoma 25 58% Alaska 42 45% Montana 9 67% New York 26 57% Utah 43 44% Oregon 10 67% Arizona 27 56% Wisconsin 44 43% Wyoming 11 67% New Hampshire 28 56% Michigan 45 40% Florida 12 65% North Carolina 29 56% South Dakota 46 38% New Mexico 13 64% Maryland 30 55% Alabama 47 35% Georgia 14 63% Nevada 31 55% Connecticut 48 35% Louisiana 15 62% South Carolina 32 55% North Dakota 49 33% Texas 16 62% Virginia 33 54% Hawaii 50 25% Illinois 17 61% Indiana 34 53% 58

59 X. About the Respondents 59

60 Details About the Respondents Geographic Location HI less than or equal to more than 150 AK CA OR WA NV ID UT AZ MT ND MN SD WI WY NE IA IL CO KS MO NM OK AR MS TX LA VT NH NY MA MI RI CT PA IN OH NJ MD WV VA KY NC TN SC AL GA ME FL 60

61 3% 3%3% 2% 2% 5% 6%5% 7% 10% Details About the Respondents 28% 14% 12% Industry Services Construction Manufacturing Retail trade Information technology or services Wholesale trade Health care Unclassified establishments Finance & real estate Arts, entertainment or recreation Forestry, fishing, hunting or agriculture Educational services Other 61

62 Details About the Respondents Annual Revenues 2% 1% 2%2% 4% $0 or pre revenue stage $1 $100,000 6% 5% 16% $100,001 $500,000 $500,001 $1,000,000 24% 15% 23% $1,000,001 $5,000,000 $5,000,001 $10,000,000 $10,000,001 $25,000,000 $25,000,001 $50,000,000 $50,000,001 $100,000,000 $100,000,001 $500,000,000 More than $500,000,000 62

63 Details About the Respondents Annual Income 27% 2% 3% 7% 5% 13% 43% Negative (net loss) $0 $100,000 $100,001 $500,000 $500,001 $1,000,000 $1,000,001 $5,000,000 $5,000,001 $50,000,000 Greater than $50,000,000 63

64 Details About the Respondents Firm age 2% 3% 4% 8% Less than 1 year At least 1 but less than 2 40% 25% 18% At least 2 but less than 3 At least 3 but less than 5 At least 5 but less than 10 At least 10 but less than or more 64

65 Details About the Respondents Number of Employees 0 4% 5% 5% 8% 2% 2% 4% 5% 26% % 22% More than

66 About Pepperdine Private Capital Markets Project The Pepperdine Private Capital Markets Project at the Graziadio School of Business and Management is the first simultaneous, comprehensive, and on-going investigation of the major private capital market segments. The research seeks to understand the true cost of private capital across market types and the investment expectations of privately-held business owners; providing lenders, investors and the businesses that depend on them with critical data to make optimal investment and financing decisions, and better determine where the opportunities to create lasting economic value may be realized. Download reports and find more information at About Pepperdine University s Graziadio School of Business and Management Founded on the core values of integrity, stewardship, courage, and compassion, Pepperdine University s Graziadio (GRAT-ZEE-ah-DEE-oh) School of Business and Management has been developing values-centered leaders and advancing responsible business practice since Student-focused, experience-driven, and globally-oriented, the Graziadio School offers fully accredited top-ranked MBA, Masters of Science, and bachelor s completion business programs. More information found at 66

67 THANK YOU! John K. Paglia, Ph.D., CFA, CPA Associate Professor of Finance Director, Pepperdine Private Capital Markets Project