NEW YORK—The Federal Reserve Bank of New York today released results from its Small Business Borrowers Poll that include new data and analysis from more than 850 local small businesses. The poll takes a fresh look at borrower demand by asking firms not only about credit applications but also about reasons for not seeking credit. The results provide insight into firms’ decisions about formulating credit demands.
Among the findings:
- The poll finds that 33 percent of firms sought credit and two-thirds were approved for a credit product in the first quarter. However, many firms chose not to apply at all, either because they were paying down debt (19 percent), already had sufficient credit (21 percent) or believed they would be turned down (27 percent).
- Consistent with other reports, successful applicants have sizeable revenues and appear better able to provide collateral. Credit applicants and firms with sufficient credit were similar in reporting larger revenues and sales increases in 2010 and in the first quarter of 2011.
- Discouraged borrowers, firms that decided not to apply because they would be turned down, attributed their decisions to concerns about low credit scores and insufficient collateral. A large majority of these firms reported flat or declining sales in the first quarter.
- Some 19 percent of the sample did not apply because they were paying down debt. Their responses to questions about sales growth provide clues about why they prioritized deleveraging. Nearly equal portions of this group reported sales increases and sales declines, suggesting that some are deleveraging proactively, while others with weaker sales may be paying down debt out of necessity.
- Poll results also show that most firms rely on business earnings and personal/family wealth for their financing. However, credit use varies considerably across groups. Applicants and firms with sufficient financing frequently mentioned using lines of credit. In contrast, both deleveraging firms and discouraged borrowers are relying on credit cards.
The New York Fed’s Small Business Borrowers Poll solicits information from small businesses in the Federal Reserve’s Second District–including New York, northern New Jersey and Fairfield County, Connecticut about their businesses’ performance and financial and credit experiences.
Responses were fielded in the first and second quarter of 2011. The poll provides qualitative information that represents the opinions of smaller firms (typically fewer than 10 employees and under $5 million in annual revenues) that choose to complete the questionnaire. First established in August 2010 as a pilot poll, responses are collected through online surveys with the assistance of public and nonprofit partners.
For additional information, visit: Small Business Finances »
About Regional & Community Outreach at the Federal Reserve Bank of New York
The Federal Reserve Bank of New York regional outreach mission is to promote sustained economic vitality by leveraging the Bank’s strengths to benefit the people in the District. The New York Fed is also active in maintaining connections with the District’s people and key communities in order to inform Bank policy decisions and build support for sound monetary and regulatory policy.
About the Federal Reserve Bank of New York
The Federal Reserve Bank of New York is one of 12 regional Reserve Banks, which together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Federal Reserve is an independent governmental entity created by Congress in 1913 to serve as the central bank of the United States. The New York Fed oversees the Second Federal Reserve District, which includes New York State, the 12 northern counties of New Jersey, Fairfield County in Connecticut, Puerto Rico and the U.S. Virgin Islands.
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