from the New York Fed
Small businesses are important to the U.S. economy and the well-being of local communities. They employ half of the nation’s private sector workers and in recent decades have created two-thirds of net new jobs. Yet, unlike large firms, which rebounded relatively quickly from the Great Recession, the pace of recovery for small firms has been slower and more uneven.
An important part of measuring the small business recovery is tracking firms’ demand for and ability to access capital. The Joint Small Business Credit Survey, a collaboration among the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia, does that. Responses to this joint survey provide insight into the dynamics behind aggregate lending trends and shed light on noteworthy segments of the small business credit market, including small dollar borrowers.
Here are key findings from the survey:
Large differences in credit demand exist between small and larger revenue firms.
Credit Application Rate | ||
|---|---|---|
| FIRM SIZE (ANNUAL REVENUES) | PERCENT OF FIRMS | |
| Microbusiness
(less than $250K) | 18% | |
| Small
($250K-$1M) | 32% | |
| Mid-size
($1M-$10M) | 31% | |
| Commercial
(>$10M) | 58% | |
Small businesses applying for credit are likely to be experienced in acquiring financing and operating at a profit.
Applicant Characteristics | ||
|---|---|---|
| PERCENT OF APPLICANTS | PERCENT OF ALL FIRMS | |
| Operated at a profit | 49% | 60% |
| Has debt | 60% | 42% |
Among applicants, there is a strong demand for small loans of $100,000 or less, with many firms borrowing to expand.
A tough credit market exists for the smallest firms and startups, with a majority unable to secure any credit.
Credit Application Outcomes | |||||
|---|---|---|---|---|---|
| ALL FIRMS | MICROBUSINESS
(<$250K) | SMALL
($250K-$1M) | MID-SIZE*
($1M-$10M) | COMMERICAL
(>$10M) | |
| Received all financing applied for | 33% | 25% | 36% | 60% | 70% |
| Received most (>=50%) | 9% | 11% | 4% | 6% | 10% |
| Received some (<50%) | 12% | 11% | 10% | 12% | 0% |
| Received none | 44% | 52% | 50% | 14% | 20% |
TABLE NOTES: Large banks are the dominant credit sources, but the use of online lenders is common across firm segments.
