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Small Business Focus

Small Business Survey
3rd Quarter 2013

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  • Business Conditions
  • Financing Conditions
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Business Conditions

Small business expectations for growth in the coming 12 months remained essentially unchanged from the first quarter of 2013. However, reports of actual sales, hiring, and capital expenditures over the prior 12 months improved significantly. Reports of increases in activity were broad based across industry. All industries reported stronger sales growth over the past year. Only firms in the construction and real estate industries reported slower year-over-year employment and capital expenditures growth.

Financing Conditions

Demand for credit changed little from the first quarter of 2013. One-third applied for credit and two-thirds did not. Of those not applying for credit, one-quarter indicated they did not because they feared they would be turned down or offered bad credit terms. These discouraged borrowers were disproportionally young and tended to have weak past sales. Credit obtainment improved in the third quarter. Forty-two percent of applying firms received the full amount requested compared to 28 percent of firms in the first quarter of 2013. The improvement in financing satisfaction occurred across industry, firm age, and measures of recent business performance.


The results in this report are often presented according to young and mature firms. We distinguish young from mature by the age of the business. We consider firms less than six years old to be young. We define a small business as a business with fewer than 500 employees.

Past Business
Construction &
Real Estate

The third-quarter survey results indicate essentially no change in the expectations of small firms. The net percent that expect sales to rise over the next 12 months increased slightly and the net percent that expect employees to increase decreased slightly, but neither difference was statistically significant. As has been the case in past surveys, young firms forecasted higher growth than did mature firms. Nearly all young firms (91 percent) expect sales to increase compared to two-thirds of mature firms.

Business conditions appear to be improving for small firms. This is the second consecutive survey with more firms reporting increases to sales, employees, and capital expenditures than reporting decreases. All three measures of year-over-year growth rose in the third-quarter survey. The improvement for sales and hiring was significantly different from the third-quarter 2012 survey, and measures of increases in capital expenditures was significantly different from the first-quarter 2013 survey.

The gap between firm expectations and actual performance narrowed somewhat in the October survey. Of the 216 firms participating in this year's third-quarter survey and last year's third-quarter survey, half overestimated sales growth and half underestimated sales growth. On average, firms were slightly better at predicting the change in sales from Q3 2012 to Q3 2013 than they were at predicting change in sales from Q1 2012 to Q1 2013.

Firms in the construction and real estate industry have seen steady growth in sales over the past year. However, like firms in other industries, their expectations for the coming 12 months have fallen.

Small firms reported that uncertainty is having a greater impact than it was six months ago. More participants reported greater impact and fewer reported less impact on this survey than participants in April 2013. When asked about the sources of the uncertainty, most firms reported the government was the primary source; many cited concern about the government shutdown and general dysfunction in Congress. The still-unknown impact of the Affordable Care Act and concern over rising health care costs were also frequent mentions. The word cloud below summarizes their responses.

Sources of
Young vs.
Mature Firms

As in past surveys, about one-third of businesses applied for credit in the third quarter of 2013. Most businesses said they were borrowing to support their cash flow needs. However, a large portion said they were borrowing to expand their business or to make capital investments.

Two-thirds of businesses did not apply for credit. Sixteen percent of all participants were discouraged from applying and 43 percent did not need credit. Those discouraged were more likely to have had declining sales in the past 12 months. Of discouraged borrowers, 43 percent had sales decrease in the past 12 months compared to 32 percent of other firms.

Third-quarter 2013 survey responses indicate that overall financing satisfaction significantly improved. Those applying for credit in third-quarter 2013 had, on average, their financing requests met more fully than those applying for financing in first-quarter 2013. The increase occurred among all four broad industry groups, for both young firms and mature firms, and across measures of recent business performance. Firms obtained more financing in the third quarter of 2013, whether they had declining sales, no change in sales, or increasing sales in the prior 12 months compared to those applying in the first quarter of 2013.

Applying firms continued to seek credit mostly at banks, with regional and community banks receiving the greatest number of applications.

Loans and lines of credit were by far the most frequent type of product applied for, with 8 out of 10 firms applying for one or the other. About 1 in 6 firms applied for vendor/trade credit, credit cards, or equity finance. The most challenging types of financing to obtain were equity investments from friends or family and loans backed by the Small Business Administration. Applications for credit cards and for vendor/trade credit were the most likely to be fulfilled. In line with past surveys, applications for loans and lines of credit at regional and community banks were met more fully than requests at large national banks.

Young firms had a relatively more difficult time obtaining credit. More than one-third of young firms received none of the credit requested across all of their applications, compared to one-fifth of mature firms who received none. Young firms were also more likely to not apply because they anticipated rejection or bad credit terms—almost half of nonapplying young firms indicated they did not apply for this reason, compared to only one-fifth of mature businesses.


The Federal Reserve Bank of Atlanta conducts a semiannual survey of small business contacts in the Southeast to get their perspective on general business and financing conditions. The Atlanta Fed conducted the third-quarter 2013 survey during the first three weeks of October. The survey was completed by 471 respondents. The questionnaire for this survey, which varies slightly each time, is available.

About 66 percent of respondents had fewer than 10 employees and revenues of less than $1 million. The median firm is 15 years old.

Survey participants are not randomly sampled. In addition, the types of firms that respond from survey to survey tend to vary. To help control for these factors, the results are weighted. Weighting not only allows for a more consistent comparison across time but also adjusts the results so that the effects of industry and firm age are more in line with the national distribution.

The results in this report are often presented according to young and mature firms. We distinguish young from mature by the age of the business. We consider firms less than six years old to be young. We define a small business as a business with fewer than 500 employees.

The following organizations helped disseminate the third-quarter 2012 survey:

Decatur-Morgan County Chamber of Commerce
Mobile Area Chamber of Commerce
Montgomery Area Chamber of Commerce
Shoals Economic Development Authority
Southern Minority Business District Council
University of Alabama

Black Business Investment Fund of Central Florida
Broward County
Capital Banking Solutions
Chamber of Commerce of Cape Coral
City of Tampa, Tampa City Council, District 7
City of North Port
Florida Alliance of CDCs
Florida Coalition for Micro Enterprise Development
Florida Community Development Association
Florida Department of Economic Opportunity
Florida First Capital Finance Corporation
Florida Prosperity Partnership
GDKN Corporation
Greater Miami Chamber of Commerce
Gulf Coast Business Finance
Manatee Community Federal Credit Union
Miami Dade SCORE
Southern Florida Minority Supplier Development Council
Space Coast Economic Development Commission
SunBiz Showcase Alliance
Sun Coast Community Capital
University of North Florida Small Business Development Corporation
Upper Tampa Bay Chamber of Commerce

Carroll County Chamber of Commerce
DeKalb Chamber of Commerce
Edge Connection, Kennesaw State University
Fayette Chamber of Commerce
Georgia Power
Metro Atlanta Chamber
Paulding Chamber of Commerce

Baton Rouge Area Chamber of Commerce
New Orleans Business Alliance
Southwest Louisiana Economic Development Alliance
The Olinger Group

Southern Rural Development Center

Entrepreneur Center, Chattanooga
Johnson City/Jonesborough/Washington County Chamber of Commerce
Kingsport Area Chamber of Commerce
Knoxville Chamber
Nashville Area Chamber of Commerce
Pathway Lending
Wayne County Chamber of Commerce

District Wide

Association for Enterprise Opportunity