Optimism Dims, Financing Improves: NSBA Report

Posted by: John Tozzi on August 3, 2011

This is a guest post by Bloomberg Businessweek reporter Victoria Stilwell.

Small business owners are suffering from an economy hurt by reduced consumer
spending and stagnant growth, according to a new survey by the National Small
Business Association, a Washington, D.C., trade group.

The NSBA’s Mid-Year Economic Report, which surveyed 400 of the group’s members online between June 24 and July 11, offered little to be optimistic about:

  • More than one-third say they aren’t confident about the future of their business from a financial perspective
  • Eighty-eight percent anticipate a recession or flat economy in the next year, an increase from 78 percent six months ago
  • Forty-five percent expect no growth opportunities in the coming year, up from 40 percent in December.

“Given the ongoing economic difficulties the U.S. has faced the past three years, small business owners overwhelmingly cited economic uncertainty as the most significant challenge to the future growth and survival of their business,” the report says.

Nearly one in three business owners cited the U.S. national debt as the most significant challenge to survival and growth, listing it as the top issue for Capitol Hill to address, followed by reducing the tax burden and mitigating the costs of health care reform. On Aug. 2, President Barack Obama signed a debt-limit compromise that prevented a U.S. default. The deal threatens automatic spending cuts to enforce $2.4 trillion in spending reductions over the next 10 years.

The NSBA survey did indicate owners are having an easier time getting financed. The number that reported access to capital as their most significant challenge fell to 22 percent from 29 percent a year ago. Furthermore, the number of owners who reported being able to obtain adequate financing is up to 64 percent from 59 percent in July 2010, the lowest figure since NSBA began asking the question in 1993.

“The prospect of getting financed for a small business—even in a growing economy—is very difficult simply due to the fact that many small businesses lack the assets necessary for a traditional bank loan, making them a riskier lending option for banks,” the report says.

More owners indicated they planned to increase jobs than cut them: 29 percent of business owners expected to hire in the next year, up from 25 percent in December. Sixty percent said employment wouldn’t change, and 12 percent of owners said they would actually decrease the number of employees. About 43 percent of owners also reported increasing employee compensation, while 17 percent reported decreasing it.

Small businesses added 58,000 jobs in July, according to the latest ADP Small Business Report, which measure nonfarm private employment from payroll data.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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