Small Business Survey: Third Quarter 2014

The Small Business Credit Survey provides information on the business conditions and financing needs of small businesses with fewer than 500 employees. Through a joint effort with the New York, Cleveland, and Philadelphia Federal Reserve Banks, the survey now includes much of the Eastern United States.

Please note that we discovered an error in the calculations of the state-level data as originally posted. We corrected the error and updated the joint report and appendix data on February 17, 2015.

  • Snapshot

    Small Business Snapshot—East, Southeast, Midwest Regions

    Small Business Snapshot
  • Key Findings

    There are large differences in credit demand between small and larger revenue firms.

    • While 22 percent of firms overall reported applying for credit in the first half of 2014, results show considerably weaker demand among firms with less than $1 million in annual revenues.
    • Only 18 percent of microbusinesses (under $250,000 in annual revenues) applied for credit. By contrast, over 30 percent of small ($250,000–$1 mil­lion) and mid-size firms ($1 million–$10 million) and 58 percent of commercial firms (>$10 million) applied for credit.

    The applicant pool is strong; applicants tend to have prior borrowing experience and are growing.

    • Applicants are more likely to be larger firms (in terms of employees), firms with revenue growth in 2013, profitable firms, and previous debt holders.
    • Despite experience, the credit search and application process is time consuming. Firms report spending an average of 24 hours applying for credit.
    • The most sought-after product was a line of credit, followed by loans and credit cards.

    There is strong demand for small loans. Firms are borrowing for expansion.

    • More than half of applicants sought $100 thousand or less in credit.
    • Nearly 40 percent of those seeking credit said the primary purpose was to expand their business—expansion was a top reason for borrowing across all revenue segments.
    • A third of firms report that financing costs have increased over the last 12 months.

    Successful applicants have prior borrowing experience and tend to be profitable and larger. It’s a tough market for the smallest firms and start-ups.

    • Successful borrowers are more likely to be older, larger (in employees and revenues), and profitable.
    • A majority of small firms (under $1 million in annual revenues) and start-ups (under 5 years in business) were unable to secure any credit.

    Large banks are a dominant credit source, but the use of online lenders is relatively common across firm segments.

    • Small businesses primarily turn to large national and regional banks for financing.
    • Almost 20 percent of applicants sought credit from an online lender in the first half of 2014.
    • Approval rates were highest at large and small regional banks and online lenders. Of firms that applied to a small regional or community bank, 60 percent were approved for at least some of the financing sought.
  • Full Report & Data