Federal Reserve Banks Release Report on Credit Experiences of Small Businesses
March 3, 2016

The 2015 Small Business Credit Survey: Report on Employer Firms released today presents a largely optimistic picture for small firms in the United States. The net share of firms reporting profitability, revenue growth and employment growth all increased from the 2014 survey. Moreover, half of applicants reported receiving all of the financing they applied for in 2015.

The Employer Firm Report presents findings on business conditions, financing needs and access to capital based on the responses of nearly 3500 small businesses from a 26-state coverage area. Results of the Survey, which is a joint effort of the Federal Reserve Banks of New York, Atlanta, Cleveland, Philadelphia, St. Louis, Boston and Richmond, provide insight into the dynamics behind aggregate lending trends and shed light on noteworthy segments of the small-business credit market, including startups and growing firms.

Key findings from the Survey include:

Half of Applicants Received All the Credit Sought

  • 47 percent of respondents reported they had applied for financing in the 12 months prior to the survey. Of these, 50 percent were approved for the full amount requested.

Newer and Smaller Firms Were More Likely to Report Credit Shortfalls

  • Employer firms with the largest unmet needs were microbusinesses (less than $100,000 in annual revenues) and young startups (0-2 years of age); 63 percent of microbusinesses and 58 percent of startups faced a financing shortfall.

Cash Flow was the Top Business Challenge for Small Firms

  • Almost 22 percent of small businesses reported cash flow is their top challenge, above business costs and far above government regulations and taxes. Hiring and retaining qualified staff is a primary challenge for growing firms.

Small Banks are the Lender of Choice

  • Banks and lenders are the dominant advisory and credit channel. Firms that applied to small banks were the most successful and most satisfied with their borrowing experience. Small banks extended at least some of the financing requested to 76 percent of applicants. Large banks approved 58 percent of applicants.

Online Lenders are a Common Source of Financing—But Have Lowest Borrower Satisfaction Levels

  • Overall, 20 percent of employer firms applied with an online lender. Among credit sources, online lenders had the second highest rate of approval at 71 percent, though approved firms were generally not very satisfied with their experience. In particular, these firms cited concerns with interest rates and unfavorable repayment terms.

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