NEW YORK–Newly released results of a survey conducted by the 12 Federal Reserve Banks offers key insights into what small businesses are reporting when it comes to their financing needs.
The Small Business Credit Survey conducted by the Fed banks polls firms with fewer than 500 employees, which represent 99.7% of private sector employers in the U.S. The 2019 study gives insights into small business performance in 2018.
According to the survey, 57% of small businesses reported revenue growth and more than one-third had added workers to their payrolls in 2018. Employment gains were most common at startups, companies with five or more employees, companies with more than $1 million in annual revenues, and firms with decision-makers younger than 46 years of age, according to the Fed.
The Fed study added that while revenues grew, the percentage of firms operating at a profit remained unchanged.
In addition, a significantly large majority of respondents (73%) reported their costs had increased in the prior 12 months, although more than half of these businesses raised their prices to cover those costs. Firms that increased their prices were twice as likely to see profitability growth as firms that did not pass on cost increases to customers, the SBCS report states.
Other Findings
Among the other findings:
- Forty-three percent of SBCS respondents reported needing small business financing for their companies (compared to 40% in 2017). More than half (53%) sought funding because they experienced a financing shortfall, which many times meant that they secured less funding than applied for. Forty-seven percent received the full amount of funding sought.
- Average annual revenue for women-owned businesses ($228,578) was less than half of the average than male-owned firms ($473,157) in 2018.
- Online lenders continue to grow. According to the SBCS study, medium- and high-credit-risk applicants seeking loans or lines of credit were as likely to apply to an online lender as to a large bank (54% and 50%, respectively). Further, they were more likely to apply to an online lender than to a small bank (41%), credit union (12%) or CDFI (5%).