NEW YORK—The Federal Reserve Bank of New York today released its latest Small Business Credit Survey, which provides data and insight into the credit experiences of more than 800 small businesses in New York, New Jersey and Connecticut. Results suggest the ability to access credit remains a widespread growth challenge for small businesses in the region, even among profitable firms. However, the percentage of discouraged firms, defined as not applying due to approval concerns, declined and more firms said they received all the credit they had applied for.
Nearly half (49 percent) of firms polled cited access to capital as a barrier to growth, but only a third of firms actually report applying for credit in the last year. While the concern was mostly (66 percent) among those firms operating at a loss, 36 percent of profitable firms also reported difficulty getting the credit they needed to expand their businesses.
Overall, the success rate for firms applying and receiving credit held steady (63 percent) from 2012, although more firms this year received all of the credit they sought. The increase was driven primarily through higher approval rates for lines of credit. Of those firms that were successful in accessing capital, 55 percent were profitable, 19 percent were breaking even and 26 percent were operating at a loss. Moreover, small businesses seeking loans above $100,000 reported a 73 percent success rate, whereas loans below $100,000 had a 57 percent success rate.
Other developments from the survey include a decrease in small businesses that reported being discouraged. This year, only 18 percent of firms were discouraged and did not apply for credit compared to 29 percent in 2012.
Discouraged firms generally are less profitable than their peers and tend to use personal savings to finance business operations. About two-thirds of the entire non-applicant pool did not apply because they were already sufficiently financed or simply did not want to take on more debt.
- Small businesses reported a need for small amounts of capital ($100,000 or less), mostly for cash flow and operating expenses.
- 28 percent of businesses cited finding employees as a growth barrier.
- Reported application rates remained steady at 36 percent with applicants having established borrowing experience and reporting positive sales growth.
- 27 percent of firms plan to apply for credit in the next six months, another 24 percent of firms are uncertain.
Insights related to Superstorm Sandy
The poll also posed a series of questions to firms about the impact of Superstorm Sandy. Of businesses that were affected, 61 percent estimated business losses of less than $25,000. Furthermore, only 8 percent of firms impacted carried flood insurance and 21 percent had no insurance of any kind at the time of the storm.
Get more online
More information including interactive graphics are available on the New York Fed’s website.
About the Small Business Credit Survey
The New York Fed’s Small Business Credit Survey collects information from small businesses in the Federal Reserve’s Second District—New York, New Jersey and Connecticut—about their performance, credit experiences and employment needs. Responses for the latest poll were collected in March and April 2013 and include forward looking assessments for certain categories. Established in 2010, the poll represents the opinions of smaller firms (typically fewer than 10 employees and under $5 million in annual revenues) who choose to complete the questionnaire. Responses are collected through an online survey with distribution assistance from public and non-profit partners.