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Small Business Focus


Small Business Survey
1st Quarter 2014


  • Highlights
  • Business Conditions
  • Financing Conditions
  • Methodology
  • Facilitators
  • Archives

Business Conditions

Small business expectations for growth in the coming 12 months remained essentially unchanged from the third quarter of 2013. Net of those expectation decreases, 63 percent of participants anticipate sales will increase and 35 percent anticipate their workforce will expand. Year over year, expectations for hiring improved somewhat, with firms in the manufacturing and agricultural industries reporting the largest change in expectations. Actual business performance was also essentially unchanged from the third quarter of 2013. Net of those citing decreases, 21 percent of small firms reported that their sales have grown over the past year, and 9 percent reported adding employees.

Financing Conditions

About 60 percent of small firms that sought financing in the first quarter of 2014 received all or most of the credit they requested. This result was consistent with the third quarter of 2013 but much higher than a year ago, when only 40 percent of firms reported that their requests for credit were mostly satisfied.

In line with past surveys, about one-third of respondents applied for credit. Of those who didn't apply for credit, most said they didn't need it. Fifteen percent of respondents said they didn't apply for credit because they anticipated bad credit terms or assumed they would be turned down. Young firms were about twice as likely as mature firms to be discouraged from applying. About 75 percent of applying firms sought loans and lines of credit from banks, 22 percent used credit cards, and less than 20 percent sought vendor/trade credit or equity investments. Firms were most successful at obtaining loans and lines of credit from regional and community banks and least successful with angel investors. The median age of firms that asked angels for investments was also much lower than those that sought financing at banks.

Definitions

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.

Business
Expectations
Hiring
Expectations
Business
Performance

The April 2014 survey revealed a somewhat more optimistic outlook. Hiring plans and expectations for sales over the next 12 months increased, while plans for capital investment remained roughly the same as the October 2013 survey.

The hiring expectations index increased among all four broad industry groups in the April survey. Three out of four of the groups also experienced a rise in expectations in the October survey. The increases were notable, but the difference was not statistically significant. Firms in the manufacturing and agricultural industries have reported the largest change in expectations over the past year.

For the fourth consecutive survey, small firms on net reported greater year-over-year increases in sales and employees. Net of those citing decreases, 21 percent of small firms reported their sales have grown over the past year, and 9 percent reported adding employees.

Credit
Demand
Financing
Satisfaction by Source
Financing
Satisfaction by Firm Age

In line with past surveys, about one-third of respondents applied for credit. Of those that didn't apply for credit, most said they didn't need it. However, 16 percent of respondents said they didn't apply for credit because they anticipated bad credit terms or assumed they would be turned down. Young firms were about twice as likely as mature firms to be discouraged from applying.

The majority of firms applying for credit in the first quarter of 2014 were doing so to help themselves maintain positive cash flow balances. About half were hoping to use their financing to expand their business.

With three-quarters of firms applying, loans or lines credit were the most sought-after source of financing. About one-fifth applied for credit cards, 16 percent applied for vendor or trade credit, and 14 percent sought equity credit from angel investors, venture capital funds, friends and family, or other.

When applying for credit over the past two years, small firms have mostly sought between $50,000 and $299,000. Young firms tended to seek lower amounts—two-thirds of young firms sought less than $50,000 compared to one-third of mature firms.

Firms applying for loans and lines of credit had more success at regional and community banks than at large national banks. More firms also sought credit at regional and community banks. Firms applying for Small Business Association-backed loans or lines of credit had the least amount of success, but the median firm age was also much lower. Angel investor financing was the most common type of equity finance sought in the first quarter of 2014.

Small firms continued to have more success obtaining credit from regional or community banks than from large national banks in the first quarter of 2014.

Overall financing satisfaction improved significantly on a year-over-year basis. Half of applying mature firms and 38 percent of young firms received all of the credit requested, compared to 30 percent and 13 percent, respectively, in the first quarter of 2013.

Sample
Characteristics
Weighting

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 first-quarter 2014 survey during the first four weeks of April. The survey was completed by 562 respondents. The questionnaire for this survey, which varies slightly each time, is available.

About 67 percent of respondents had fewer than 10 employees. Sixty-three percent had revenues of less than $1 million. The median firm is 11 years old.

Respondents are located mostly in the Sixth Federal Reserve District, which includes Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee.

About half of business owners participating in the first-quarter survey had locations in Georgia.

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 following organizations helped disseminate the first-quarter 2014 survey:

Chamber of Commerce of the Palm Beaches (FL)
Florida First Capital Finance Corporation
Georgia Small Business Development Center
Indian River County Chamber of Commerce (FL)
Johnson City/Jonesborough/Washington County Chamber of Commerce (TN)
Kingsport Area Chamber of Commerce (TN)