Main Street Monday — Fed Says Small Biz Optimistic, with Strong Revenue Growth and Profits

July 23, 2018

By Bob Coleman
Editor, Main Street Monday
Contributing Editor
Dominic J Bartolone

Main Street Monday — Fed Says Small Biz Optimistic, with Strong Revenue Growth and Profits

The 2018 survey compiled by the 12 Federal Reserve Banks is yet another data point touting Main Street optimism.

Here are some highlights from the report:

Performance and Optimism

  • A majority of firms reported positive revenue and profitability. The net share of respondents reported stronger revenue growth, employment, and profitability over 2017.
  • A net 55% of firms expect higher revenues in 2018, with 44% planning to hire more employees. These are the highest levels since 2015.

Demand for New Financing

  • Demand for new financing was down slightly in 2017, with 40% of firms applying for loans, compared to 45% during 2016.
  • A net 55% of applicants were seeking less than $100K, and nearly three-quarters were seeking less than $250K.
  • A total of 59% of borrowing needs was for cash-flow purposes, with 43% borrowing for operating capital, and 26% refinancing existing debt.
  • A majority of businesses seeking financing worked with banks – 48% with large banks, 47% with small banks, and only 24% with online lenders. Another 18% worked with other lending institutions, such as equipment financiers, private investors, government entities, and friends and family.
  • Of those choosing not to apply for debt, 50% said they had sufficient financing, 26% decided not to take on more debt, and 13% believed they wouldn’t qualify.

Increased Financing Success

  • A net 47% of applicants reported obtaining full financing in 2017, versus 40% from the previous year.
  • Credit lines were also more successful, with 59% receiving all of the credit they requested.
  • Smaller businesses had the hardest time financing, with 70% of micro business applicants failing to obtain full funding, and 61% of startups coming up short.
  • Applications to online lenders increased to 24%, with overall satisfaction with the online lending process rising to 35%.

Financial Challenges Persist

  • A total of 64% of respondents said they experienced economic challenges in 2017.
  • A net 40% said the primary challenge was paying operating expenses, 30% said it was access to credit, with micro businesses and startups saying this is of particular concern.
  • Nearly half of leisure and hospitality firms reported difficulty with paying operating expenses, and another 38% said they had trouble making payments on their debt.
  • Personal funds were the most common choice among business-owners to address financial challenges, with only 39% choosing to take on additional debt.

Access the report here: