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posted on 24 April 2016

2015 Small Business Credit Survey: Small Businesses Reported Stronger Performance In The 2015 Survey Than In The 2014

from the New York Fed

Despite the significance of small businesses to the U.S. economy and to local communities, information on small business financing conditions is limited, leaving important knowledge gaps for policymakers and service providers.

To fill those gaps, the Small Business Credit Survey, a collaboration among seven Federal Reserve Banks, including New York, Atlanta, Boston, Cleveland, Philadelphia, Richmond and St. Louis, offers insight about business owners' financing decisions. The survey focuses particular attention on how credit demand, sources and outcomes vary within the small business sector.

This report focuses on the survey responses of 3,459 employer firms from 26 states. It sheds particular light on three sub-segments - startups, microbusinesses, and growing firms, or those with increasing revenues and employees and plans to increase or maintain their number of employees.

Here are key findings from the survey:

More small businesses reported stronger performance in the 2015 survey than in the 2014 survey.

Employer Firm Performance Index1

2014 SURVEY2015 SURVEY
Profitability15%27%
Revenue growth21%26%
Employment growth14%15%

TABLE NOTES

1 For revenue and employment growth, the index is the share reporting positive growth minus the share reporting negative growth. For profitability, it's the share profitable minus the share not-profitable.

Cash flow is a common challenge for small businesses. For growing firms, hiring and/or retaining qualified staff is the top challenge.

Top Business Challenge By Type Of Firm

ALL FIRMSGROWINGSTARTUP

(0-2YEAR)

MICRO

(<$100K)

Cash flow22%23%25%26%
Costs of running business19%16%23%22%
Credit availability9%12%13%13%
Government regulations10%9%4%4%
Hiring and/or retaining qualified staff17%24%15%9%
Revenues/sales13%6%10%16%
Taxes9%8%9%7%
Other2%3%2%3%

While financing success improved in the 2015 survey, half of applicant firms received less than the amount requested.

Application Outcomes By Size Of Firm

FULLY FUNDEDFINANCING SHORTFALL
All firms50%50%
>$10M73%27%
$1M-$10M63%37%
$100K-$1M45%55%
Micro (<$100K)37%63%

Traditional bank lending continues to be the primary source of financing for small businesses.

Credit Sources Applied To By Revenue Size Of Firm

ALL FIRMS>$10M$1M-$10M$100K-$1MMICRO

(<$100K)

Small bank52%53%59%52%44%
Large bank42%58%45%39%41%
Online lender20%6%11%22%30%
Credit union9%1%4%9%14%

Online lenders have the lowest borrower satisfaction levels because of concerns with high interest rates and unfavorable repayment terms.

Lender Satisfaction Score 1

LENDERSATISFACTION SCORE
Small bank75%
Credit union56%
Large bank51%
Online lender15%
Other33%

TABLE NOTES

1 Satisfaction score is the share satisfied with lender minus the share dissatisfied.

[click here to download the entire report]

Source

https://www.newyorkfed.org/smallbusiness/small-business-credit-survey-employer-firms-2015

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