Survey: Small Business Trends Returning to Prepandemic Norms

The 2023 Report on Employer Firms: Findings from the 2022 Small Business Credit Survey, issued Wednesday by the 12 Federal Reserve banks, found promising signs that some small business trends are returning to prepandemic norms. 

For the first time since the 2020 survey, firms in the Small Business Credit Survey were more likely to report that revenues and employment levels increased rather than decreased in the past 12 months, and the share of firms reporting they were operating profitably rose substantially year-over-year.

The 2022 SBCS yielded 7,864 responses from a nationwide sample of small employer firms with one to 499 full- or part-time employees across all 50 states and the District of Columbia.

Among the key findings:

• Revenue, employment and profitability each improved from 2021, but expectations worsened year-over-year. The share of firms operating at a profit rose from 35% in the 2021 survey to 45% in the 2022 survey.
• Almost every firm in the survey experienced at least one operational or financial challenge. In response to hiring challenges, firms were more likely in 2022 than in 2021 to make changes to employee compensation (for example, raising wages or enhancing nonwage compensation) and less likely to reduce business operations or add to their employees’ workload.
• Firms were more likely to use personal and government sources than funding from financial institutions. Two-thirds of firms (66%) used the owner’s personal savings or funding from friends or family in the past five years.
• The application rate for traditional financing rebounded to prepandemic levels. The share of firms fully approved increased from 2021 but remains lower than in 2019. While applications for pandemic-related financial assistance declined, the share of firms that applied for a traditional loan, line of credit or merchant cash advance increased to 40% in 2022, up from 25% in 2021.

Published by The Business Journal, Youngstown, Ohio.