Small Business Have Less Outstanding Debt and Less Desire for Loans

December 31, 2024

Delaney Sexton
Contributing Editor

Small Business Have Less Outstanding Debt and Less Desire for Loans

The Federal Reserve Banks published their 2024 annual Small Business Credit Survey. The survey has been following small business trends since 2016, and here is what the survey found this year:

Consistent with the previous year, 93% of small businesses have undergone financial challenges during the last 12 months. The share of businesses with financial difficulties has been on the rise since 2020 and reached its peak in 2022.

When dealing with these challenges, small businesses have become less reliant on personal funds than in previous years. Just over half of small business owners used their own funds in 2023, a decrease from over 60% that reported the same between 2017 and 2021.

Since 2020, there has been a minor improvement in the number of small businesses that are in fair or poor financial condition. In 2023, 55% of small businesses reported being in poor to fair financial condition, down from the peak of 59% in 2021.

The portion of small businesses carrying outstanding debt was unchanged from the previous year at 72% of small businesses. Although this figure is still higher than pre-pandemic levels, progress has been made since 2020.

Fewer small businesses applied for new financing in the previous 12 months. Only 37% reported applying for credit compared to 40% the year before. Additionally, there was a slight decline in the number of applicants that were fully approved in the last 12 months. While 53% of small business applicants received full approval the previous year, only 51% were approved in 2023.

Source:
2024 Main Street Metrics – Small Business Credit Survey