The Small Business Credit Survey, conducted jointly by the Federal Reserve Banksof New York, Atlanta, Cleveland, andPhiladelphia, was released today.
It more or less confirms the narrative that the amount of credit available to small businesses continues to recover, but is still below pre-recession highs, particularly for businesses with less than $US1 million in revenue.
The Cleveland Fed put out its own report about the health of small business lending earlier this month. It’s conclusion was the same:
Small business loans now stand 17 per cent below the peak reached prior to the recession. While small commercial and industrial loans grew 3.4 per cent over the past year, this modest improvement does not provide strong assurances about the health of lending in this space. In contrast, lending to larger businesses (loans greater than $US1 million) bounced back quickly and loans outstanding are now more than 24 per cent higher than pre-recession levels.
Here are the highlights of the small business credit survey:
About a quarter of small businesses hired new people over the last year, and 15% of them got smaller.
The biggest problem for all small businesses in the first half of the year was difficulty attracting customers, followed by lack of credit, which suggests there are more problems on the demand side rather than the supply side for small businesses this year.
Most small businesses aren’t run on credit, but on the personal savings of whoever runs the business. It isn’t until you get to revenues over $US1 million per year that credit becomes the primary type of funding.
Really small businesses, particularly those with less than $US250,000 in annual revenue, are applying for credit at a much lower rate than bigger businesses.
For smaller businesses, larger regional banks are the best bet for securing credit.
More than half of businesses with less than $US1 million in revenue that apply for credit receive nothing at all.
The biggest reason for not getting credit is a low credit score.