2017 Small Business Credit Survey

Timely information on small business financing needs, decisions and outcomes is critical to understanding and fostering the sector's health and growth. To provide that information to policy makers, researchers and service providers, the Small Business Credit Survey (SBCS) asks small business owners to detail their current business climate, financial needs and recent credit experiences.

In 2017, following widespread natural disasters, the SBCS included a special module of questions for firms located in FEMA-designated disaster zip codes.

The Report on Disaster-Affected Firms draws on Census data and the SBCS dataset to understand the unique attributes of FEMA-designated disaster areas in late 2016 and 2017, and the performance, experiences, and financing needs of firms with natural disaster-related losses. Our analysis compares firms that were located in natural disaster-affected areas but did not face damages (defined below as "unaffected firms") to those that did (defined below as "affected firms").

Note: This report does not include data for Puerto Rico or the U.S. Virgin Islands, areas that experienced extensive damage in 2017 from Hurricanes Irma and Maria. The business experiences and needs on these islands differ considerably from those on the mainland. With that in mind, we conduct a separate annual small business survey to gauge the needs of Puerto Rico specifically.

The following are key findings from our analysis:

  • Natural disaster-affected areas in 2016 and 2017 differed from the U.S. overall in notable ways.
  • In disaster-affected areas, losses were fairly common.
  • Disasters struck small firms across the age and income spectrum, but losses were concentrated among Hispanic-owned firms and firms in the retail and leisure & hospitality industries.
  • Foregone revenues, not assets, were the largest source of losses.
  • Affected firms reported sizable revenue and employment gaps and elevated incidence of financial challenges compared to unaffected firms.
  • Firms' insurance holdings appear to be mismatched to the sources of their damages, leaving uncovered losses.
  • More affected firms applied for credit financing, including SBA loans, than disaster relief. The hardest hit firms tended to hedge, applying for both disaster assistance and financing.
  • Affected firms sought credit at higher rates than unaffected firms.
  • Affected firms are higher risk and experience notable funding gaps.
  • High levels of optimism for 2018 among affected firms.
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Report on Nonemployer Firms

The findings of the Report on Nonemployer Firms provide an in-depth look at the financial experiences and challenges of nonemployers. Fielded in the third and fourth quarters of 2017, the survey yielded 5,547 responses from nonemployer firms, businesses in the 50 states and the District of Columbia that have no full- or part-time employees. A new feature of this year's report—a collaboration with the Cleveland and Richmond Federal Reserve Banks—is a deep-dive into five different categories of nonemployer firms based on the nature of their work, including "supplemental work" where the business is not the owner's primary source of income; contract work; "stable nonemployer" where the business is the owner's primary source of income and the owner has no plans to hire; "early-stage potential employer" where the firm is two years or younger with plans to add employees in the next 12 months; and "late-stage potential employer" where the firm is older than two years with plans to add employees in the next 12 months.

The 2017 survey data revealed nonemployer firms are performing positively overall despite notable financial challenges, especially for particular segments of firms. Overall, the survey finds:

  • Nonemployer firms are unique from employers in key ways, including having smaller revenues, being younger, exhibiting less financial strength, and being more likely to rely on their owner's personal finances to fund operations.
  • Slightly more nonemployers hire contract workers, compared to employer firms, while more than 1 in 4 nonemployer firms plan to add employees in the next 12 months.
  • Performance and growth expectations vary by revenue size, with larger-revenue nonemployer firms being more profitable and smaller-revenue firms being more optimistic about their future revenue growth.
  • Nonemployer firms cited paying operating expenses and accessing credit as their top financial challenges, and nearly three-quarters turned to personal funds to address those challenges.

When looking across categories of nonemployer firms:

  • They differ in demographics and performance.
  • They cite divergent financial needs and funding success.
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Report on Employer Firms

The findings of the Report on Employer Firms provide an in-depth look at small business performance, debt holdings, and credit experiences. Fielded in the third and fourth quarters of 2017, the survey yielded 8,169 responses from small employer firms, businesses that have 1-499 full- or part-time employees (hereafter “firms”), in the 50 states and the District of Columbia. New features of this year’s report include expanded time trend information and a detailed look at the credit experiences of firms by various segments, including revenue size, age, and industry. The survey findings complement other national data on aggregate lending volumes and lender perceptions.

Heading into 2018, small businesses reported stronger revenue growth and profitability but continued financial challenges for some segments of firms. Overall, the survey finds:

  • Improved performance in 2017 and heightened optimism for revenue and employment growth in 2018.
  • Comparatively weaker demand for new financing, with a smaller share of firms applying for new capital than in prior years and half of nonapplicants reporting that they had sufficient financing.
  • Improved financing success for applicants, with a larger share receiving the full amount of financing requested and higher success rates for loan and line of credit applicants compared to 2016.
  • A moderate increase in applications to online lenders2 overall in 2017, with notably higher application rates among self-reported medium and high credit risk firms.
  • Continued financial challenges—most commonly, paying operating expenses and wages, and credit availability—for some firm segments, particularly recent credit applicants, micro firms (≤$100K in annual revenues), startups (0-5 years), and firms in the leisure and hospitality industry.
Download the Full Report | Download the Data
Report on Disaster-Affected Firms
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