LOMBARD, Ill.—Today, small business sales expectations and outlook on the economy are much rosier than they have been in recent years—a good sign for credit union lending and a possibly a leading indicator of the future direction of overall consumer sentiment, a new reports shares.
According to Raddon’s Small Business National Research, 59% of small businesses expect an increase in sales, while only 6% expect a decline.
That’s a turnaround from recent years, explained Marcus Rothaar, financial analyst at Raddon Financial Group.
“Although the recession that began in 2007 officially ended in 2009, consumers were still feeling the pinch of a 9.8% unemployment rate when Small Business Saturday was introduced in 2010,” said Rothaar. “A Consumer Confidence Index of 90 represents a more stable economy, so with the index still at a gloomy 54.1 in November 2010, it was clear the economic recovery still had a ways to go in the eyes – and wallets – of consumers. By extension, 2010 was also a difficult time for small businesses. According to Raddon’s 2010 survey of 1,200 small businesses, a third of businesses projected declining sales revenue that year and only a quarter expected a sales increase.”
The majority of small businesses are more optimistic with their economic outlook, with 29% finally beginning to see signs that the economy has improved, and another 22% having seen definitive evidence that the economy is improving, explained Rothaar.
“Overall, small business owners are more optimistic about the economic recovery than the general population, which may be a leading indicator of the future direction of overall consumer sentiment,” he said.
Looking forward, there are additional signs of optimism among small business owners.
“While half of all small business owners feel the economy will maintain the status quo in the next six months, a third feel the economy will be in better shape,” said Rothaar. “Once again, small businesses are more hopeful for a prosperous 2016, compared to just 13% of the general consumer population who expect things to be in better shape in the next six months.”
The increase in small business optimism is a positive sign for financial institutions on a number of fronts.
“Loan demand increases as the health of small businesses strengthens,” noted Rothaar. “Financial institutions have played a vital role in the resurgence of small businesses since the end of the recession by providing the needed financing to help spur growth. In the last three years, half of small businesses have applied for a loan, with 20% applying more than once. Of those applying for loans, 90% were successful in obtaining a loan. The opportunities and competition to provide these small business loans will be strong in 2016.”
But small businesses are still cautious, the study found.
Perhaps most pointedly, 41% of small businesses surveyed in fall 2015 say that they see no evidence of the recession being over,” added Rothaar. “In other words, things are not dramatically different for these small businesses than they were when Small Business Saturday was launched in 2010.”