A credit crunch has descended upon small business owners nationwide hindering their growth and causing some to say that if it continues, they’ll be forced to close altogether. A new nationwide survey from Goldman Sachs 10,000 Small Businesses Voices today shows 78% of small business owners are concerned about their ability to access capital and 29% say they can’t afford to take out a loan given current interest rates. Eighty-five percent say if access to capital continues to tighten it will impact their growth forecast. Of those that say their growth forecast will be impacted, 67% will halt expansion plans if credit continues to tighten, and, alarmingly, 21% would close their business if the credit market continues on this trajectory.
The access to capital challenges are even more stark for minority-owned businesses. Black small business owners have a higher application rate for business loans or lines of credit, but have a much lower rate of receiving the full funding requested compared to their white peers.
- While 43% of Black business owners have applied for a loan or line of credit in the past year (versus 30% of White small business owners), only 26% reported receiving all of the funding they requested (versus 51% of White small business owners).
- While 78% of all small business owners said it was difficult to access capital, the challenge is more pronounced among minority small business owners.
- 81% of Hispanic small business owners and 85% of Black small business owners are concerned about their ability to access capital.
“Small business owners are the backbone of our economies, but the ongoing credit crunch means that capital to fund expansion plans, reinvest in our companies or hire more workers is unaffordable and inaccessible,” said Susan Walker, owner and founder of Walker Bookstore in Tempe, AZ. “Now, even after 11 interest rate hikes since March 2022, the Federal Reserve is pushing a new regulation which could make loans more expensive and more difficult to obtain. This latest survey data makes it perfectly clear that we need regulators to stop the squeeze on small businesses.”
On top of being deeply concerned about their ability to access capital, small business owners are concerned about the overall business climate and the state of the U.S. economy:
- Thinking about the past four years, nearly a third (31%) say 2023 has been the most difficult year for business. Only 6% more said 2020’s pandemic year was more difficult (37%).
- 33% of small business owners applied for a new business loan or line of credit in the past year, with 65% of those who have applied stating they found it difficult to access affordable capital
- 64% of small business owners have outstanding loans and/or lines of credit. Of those, 35% have a variable interest rate. 88% of those with variable interest rates have seen their interest rates increase, with 58% saying the increase has been between 3-10%.
- Compared to three months ago, 46% believe the economy has gotten worse.
The survey’s findings come after an announcement last week that small business owners across the country are joining a diverse group of stakeholders including lawmakers from both sides of the aisle, the NAACP, U.S. Chamber of Commerce and the Urban League, in mobilizing to raise concerns about the Federal Reserve’s proposed regulation, formally called “Basel III Endgame.” The nationwide campaign, dubbed Tell the Fed to Stop the Squeeze on Small Business, launched with two new digital advertisements and will continue in the coming weeks with additional paid media, as well as other activations of small business owners to ensure policymakers understand the devastating impact of the proposed regulation.
A significant majority, 87%, said it is important for their elected officials in Washington to weigh in with the Federal Reserve regarding their proposed regulation.
The nationwide survey of 1,240 small business owners was taken October 9-12, 2023. Respondents came from 48 U.S. States, including Arizona, plus Puerto Rico and Washington, D.C. The full survey results can be viewed here: https://www.goldmansachs.com/citizenship/10000-small-businesses/US/infographics/stop-the-squeeze-on-small-businesses/index.html.