Cleveland Fed Study Finds Small Businesses Optimistic

CLEVELAND – The financial health of small businesses in the United States continues to improve, the Federal Reserve Bank of Cleveland reported Friday.

The 2015 “Small Business Credit Survey: Report on Employer Firms,” presented “a largely optimistic picture for small firms in the United States,” the Cleveland Fed said. “The net share of firms [with more than one employee] reporting profitability, revenue growth and employment growth all increased from the 2014 survey. Moreover, half the applicants reported receiving all of the financing they applied for in 2015.”

Key findings from the 2015 survey:

  • Nearly half of those who applied for credit got all they asked for. Forty-seven percent of respondents said they had applied for financing in the 12 months before they completed the survey. Of these, 50% said they were approved for the full amount.
  • Newer and smaller firms were more likely to report they didn’t secure all the credit they applied for. Firms with more than one employee that had the most difficulty obtaining credit were startups (defined as in business less than two years) and microbusinesses (those with less than $100,000 in annual revenues). Fifty-eight percent of startups and 63% of the microbusinesses reported not getting all the financing they sought.
  • Cash flow was small businesses’ top challenge. Nearly 22% of small businesses listed cash flow as their most pressing problem, above business costs and “far above government regulations and challenges,” the Cleveland Fed said. Hiring and keeping qualified staff is a growing concern.
  • Small businesses prefer to borrow from community banks. Firms that applied to small banks were the most successful and most satisfied with how their bank treated them, the Cleveland Fed said. Small banks approved at least some of the loans sought by 76% of applicants while large banks OK’d only 58%.
  • Online lenders are becoming a more common source of funding but have the lowest levels of customer satisfaction. Twenty percent of respondents applied to an online lender and this category had the highest approval rate, 71%, but most who applied were not that happy with their experiences. They were unhappy about the rates of interest charged and repayment terms.

The “Employer Firm Report” surveyed nearly 3,500 businesses in 26 states about how they perceived business conditions including how much credit they needed and their access to capital. The Federal Reserve Banks of New York, Atlanta, Cleveland, Philadelphia, St. Louis, Boston and Richmond conducted the research.

Copyright 2022 The Business Journal, Youngstown, Ohio.