Small Business Trends Improving, but Outlook Still Uncertain – Fed Survey

A survey of small business owners conducted by the Federal Reserve found that small business conditions are back to pre-pandemic levels, but amid continuing financial and operational challenges. , more and more companies are uncertain about their growth this year.

Companies Surveyed in Small Business Credit 2022 The survey was more likely to report that earnings and employment levels had increased rather than decreased over the past 12 months. This is the first result since the 2020 survey.

Also, the number of respondents operating at a profit increased from 35% in the 2021 survey to 45% in 2022.

The survey received 7,864 responses from a convenient nationwide sample of small businesses with 1 to 499 employees.

cloudy outlook

Meanwhile, businesses remain uncertain about the future. Earnings, employment and profitability have improved from 2021, but expectations have deteriorated.

The percentage of respondents who expect revenues to increase in 2023 fell from 42% to 35%, well below pre-pandemic levels. The proportion of respondents who expect job growth has also decreased from 31% in 2021 to 27% in 2022.

Uncertainty arises from ongoing financial and operational challenges. The survey found that four out of five companies face challenges related to rising costs, with almost half of respondents finding it difficult to pay operating expenses and manage uneven cash flows. reporting. Operationally, the company was struggling with hiring/retaining qualified staff and supply chain issues.

Inflation remains the biggest problem, according to the latest National Federation of Independent Business report on small business trends. NFIB chief economist Bill Dunkelberg said, “SME inflation is starting to ease, but owners remain cynical about future business conditions.” “Employers have a negative outlook on the small business economy, but they continue to strive to fill vacancies and return to full staff to improve productivity.”

Funding source

A Federal Reserve study found that small businesses are more likely to use personal and government funding sources than financial institutions. Two-thirds of her respondents have used personal savings or funds from friends/family in the past five years.

Meanwhile, traditional loan application rates have returned to pre-pandemic levels. The percentage of fully approved respondents increased year-over-year, but remained lower than in 2019.

A recent JP Morgan survey found that small businesses are more confident in their company’s prospects than in the economic outlook.