Press Release

Small Employer Firms Reveal More Optimism And Success, Though Financial Challenges Persist For Some

Fed Reserve Banks’ Headline Small Business Report Finds More Firms Are Profitable And Confident; Yet Certain Segments Struggle Acutely With Credit Access, Expenses And More
May 22, 2018

The 12 Federal Reserve Banks today issued the 2017 Small Business Credit Survey: Report on Employer Firms, which examines the results of an annual survey of small business owners nationwide. The Report focuses on small employer firms, businesses that have between 1-499 full- or part-time employees (hereafter "firms"). It builds on the Reserve Banks' new website, which serves as a hub for small business research and analysis.

In an accompanying Medium post, New York Fed President William C. Dudley outlined key challenges small businesses face and potential ways to break down their barriers to growth. He writes, "Small businesses are critical to the U.S. economy and it's clear that we must do more to understand their needs and realities." He also asserts that in order to help them succeed, "It comes down to providing education on managing personal finances, encouraging greater transparency in lending practices, expanding access to capital, and breaking down barriers to procurement opportunities."

The Report found that firms' profitability, revenue growth and employment growth improved, and optimism about future performance reached its highest level in several years. More firms received all of the financing requested, and a significant portion did not apply for credit because they already had sufficient financing. However, despite this success, smaller firms, startups and those in the leisure & hospitality industry continued to struggle acutely with financing challenges.

Key findings can be found in the Report on Employer Firms' executive summary. These findings include:

Performance and Expectations

  • The share of firms reporting profitability, revenue growth and employment growth all increased from the 2016 survey.
  • Optimism about the coming year reached its highest level since 2015, with a net 66% of firms anticipating revenue growth and a net 44% expecting to hire new employees.

Financing Demand, Approvals and Sources

  • Fewer firms applied for financing, and half of the nonapplicants did not apply because they already had sufficient financing.
  • A larger share of applicants received the full amount of financing requested (46% versus 40% in 2016).
  • Applicants sought financing most frequently at large banks (48%), small banks (47%) and online lenders (24%).
  • Applicants had the most success at community development financial institutions (88% approval rate) and online lenders (75% approval rate). Of note, applications to online lenders increased, but firms were the least satisfied with them.

Financial Challenges and Reliance on Personal Finances

  • Even with this stronger performance, greater optimism and reduced applications for financing, 64% of firms experienced financial challenges.
  • These challenges were particularly acute for startups, those with smaller annual revenues and those in the leisure & hospitality industry.
  • Firms most often addressed financial challenges by using personal funds (67%).

Takeaways Specific To New York Fed's Region

New York Fed's Region (Second District – CT, NJ, NY)1

  • Second District firms were more likely to face financial challenges in the past 12 months (70% versus 64% nationally).
  • 38% of firms in the Second District applied for financing in the prior 12 months, similar to 40% of firms that did nationally. However, Second District firms were, on average, slightly less successful.
  • Second District firms were more likely to apply to large banks for loans, lines of credit or cash advances than firms nationally (62% versus 48% nationally).
  • Among Second District firms that did not apply for financing in the prior 12 months, a higher share than firms nationally were discouraged from applying because they believed they would be turned down (18% versus 13% nationally).

New York

  • New York firms were smaller as measured by annual revenue and number of employees than the national averages: 24% reported annual revenue of $100K or less (versus 18% nationally), and 61% employed 1-4 workers (versus 55% nationally).
  • More New York firms exhibited risk factors compared to firms nationally. 11% identified as being high credit risk (versus 6% nationally), and 71% experienced financial challenges in the prior 12 months (versus 64% nationally).
  • 35% of New York firms applied for financing in the prior 12 months, compared to 40% of firms nationally. New York applicants were approved for financing at a similar rate to firms nationally.
  • New York firms applied to large banks for financing more frequently than firms nationally (59% of New York firms that applied versus 48% nationally).

Additional reports on the 2017 Small Business Credit Survey will be released throughout 2018 at These will take an in-depth look into specific types of small businesses, including nonemployer firms, start-ups and minority-owned firms.

About the Small Business Credit Survey (SBCS)

The SBCS collects information about business performance, financing needs and choices and borrowing experiences of firms with fewer than 500 employees. Responses to the SBCS provide insight into the dynamics behind aggregate lending trends and about noteworthy segments of small businesses. The results are weighted to reflect the full population of small businesses in the United States. The SBCS is not a random sample; therefore, results should be analyzed with awareness of potential methodological biases.

The SBCS includes experiences from firms across all 50 states and the District of Columbia through the joint efforts of the Federal Reserve Banks of New York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, Philadelphia, Richmond, San Francisco and St. Louis. The 2017 SBCScollected 14,465 responses in total, 8,169 of which were from employer firms.


1Note that the New York Fed’s region (the Second District) includes New York State, the 12 northern counties of New Jersey, Fairfield County in Connecticut, Puerto Rico and the U.S. Virgin Islands. Note that the bullets in this section include statewide data from New York, New Jersey and Connecticut. This report does not include data for Puerto Rico or the U.S. Virgin Islands. The business experiences and needs on these islands differ considerably from those on the mainland and there will be a separate report on small businesses in Puerto Rico later this year.

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