Small Business Owners to Banks: Can I Get a Loan, Please

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As securing loans from large banks remains tricky for many mom and pops after the depths of the recession, more small-business owners are turning to small banks and other nontraditional sources of capital to grow their operations.

Just ask Dave Wheeler, owner of Manzanita Outfitters in Prescott, Ariz. He's knocked on many doors for cash infusions including traditional large banks, small merchant financing products and has even used his home as equity to help finance the business.

"It was brutal, just brutal," Wheeler said. "I've suspended paychecks from time to time. You do whatever you can to keep the doors open," he said.

Wheeler's comments were part of a small-business roundtable Wednesday with the National Federation of Independent Business and American Express, which offers a small merchants financing products and promotes an annual "shop small" initiative.

"Small business as a group, they aren't really out there borrowing," said NFIB chief economist Bill Dunkelberg.

With bank loan competition still tight, more start-ups and small-business owners are turning to small community banks for cash.

There's also growth in alternative lenders, which use technology-driven data analytics (aka fancy enterprise software) to gauge loan applicants. These lenders are also using nontraditional measures to assess applicants, including payroll and ratings from the Better Business Bureau and Yelp.

(Read More: Starved for Cash, Main Street Turns to Alternative Lenders)

Wednesday's roundtable comments echo the NFIB's most recent, flat reading on Main Street business sentiment.

Small-business owners' confidence fell in March—halting a three-month winning streak, as entrepreneurs still aren't feeling optimistic about business or making substantial hiring plans. The NFIB said April 9 that its small-business optimism index edged down 1.3 points to 89.5 from 90.8 points in February. The group's next monthly reading is due in early May.

(Read More: Spooked by Uncertainty, Little Main Street Hiring)

Focus on Job Creation

Beyond tight lending conditions, small- and medium-sized businesses have been facing a barrage of challenges—from taxes to anticipated rising health-care costs—that have spooked them from making substantial spending decisions including hiring—a traditional driver of past U.S. economic recoveries.

According to a study released Wednesday on middle-market companies —firms with annual revenues of $10 million to $1 billion—there's an increased willingness to significantly cut back, specifically through both investment and hiring, if business costs and regulation become overly burdensome.

"While the (middle-market) sector continues to outperform both its own expectations and national economic growth rates, the prospect of increased costs related to health care or tax increases could hold back this positive trend," said Anil Makhija, director of National Center for the Middle Market.

Restrained Optimism: NABE Survey

A separate April report from the National Association for Business Economics, or NABE, showed a similar trend: an increase in business activity, but with caveats.

Only 5 percent of those surveyed by the NABE indicated they expect real GDP to expand faster than the economy's long-run growth of 3 percent. Top concerns cited included the state of the global economy, the possibility of further government spending cuts, and a challenging regulatory environment. A first-quarter GDP reading is due Friday.

Sequester Budget Cuts to Hit Main Street

The budget cuts, also known as sequestration, also loom large over Main Street.

Cuts would hit domestic programs that fill every corner of the economy — military spending, aviation and education programs for low-income families. But unlike larger private-sector businesses, smaller employers usually don't have buffers such as large cash reserves to ride out federal budget cuts. Most smaller firms also can't quickly pivot their business strategies to ride out a rough patch. (Read More: Sequestration — CNBC Explains)

To be clear, the budget cuts are likely to have a rolling, accumulated impact on small business. Companies with U.S. government contracts must decide which workers will likely be laid off as funds to keep them on payroll evaporate.

(Read More: Budget Cuts to Hit Main Street, but Sky Won't Fall March 1)

'Two Economies'

NFIB's Dunkelberg said Main Street remains stuck for the most part, while corporate profits and the stock market reach fresh highs. "I characterize this as a bifurcated economy," he said on Wednesday's conference call.

Overall Wheeler of Manzanita Outfitters said you have to strap yourself in and prepare for a business plan that goes off the rails now and then. And have a backup plan, otherwise known as "the friends and family plan," he said.

(Read More: Subway 'Wouldn't Exist' If Started Today Due to Regulations: Founder Deluca)

—By CNBC's Heesun Wee; Follow her on Twitter @heesunwee