Small Business Credit Survey: Report on Nonemployer Firms

The Small Business Credit Survey is a collaboration among seven Federal Reserve Banks: Atlanta, Boston, Cleveland, New York, Philadelphia, Richmond, and St. Louis.

The survey collects information about business performance, financing needs and choices and borrowing experiences of firms with fewer than 500 employees, including firms without employees other than the owners.

In 2015, the survey collected 5,420 responses in total across 26 states—1,576 of which were from nonemployer firms.

  • Key Findings

    Owners rely on their businesses for income

    Two-thirds of nonemployer businesses provide the primary source of income for their owner(s). While owners of smaller revenue firms are generally less dependent on their business than owners of larger firms, about half of firms with less than $25K in annual revenues provide the owner's primary source of income. The larger firms—those with annual revenues greater than $100K—are most likely to serve as the owner's primary income source.

    Nonemployers are struggling to make a profit, and the owners bear much of the burden

    Only 35 percent of nonemployers indicated they're operating profitably. Their top two challenges in doing business are generating sales and managing cash flow. Forty-four percent of all nonemploy­ers rely primarily on the personal funds of the owner to run the business. Among smaller and newer firms, nearly two-thirds are reliant on the owner's personal funds as a primary funding source for the business.

    Many firms are debt averse

    Sixty-eight percent of nonem­ployers did not apply for financing in the prior year. One-third of nonapplicants did not want to accrue debt and another quarter believed their application would not be approved. Collectively, applicants were less profitable than the nonapplicants.

    Applicants report issues with the lending process across a variety of lenders, but they are more satisfied with small banks

    Applicants for loans and lines of credit turned mostly to large and small banks, but a noteworthy share (28 percent) sought credit at an online lender. When applicants were asked about their satisfaction with each of these sources, large banks and online lenders fared the worst; 62 percent of applicants to large banks and 55 percent of applicants to online lenders were dissatisfied with their experience overall, compared to 39 percent of applicants to small banks. The top complaint with large banks is a difficult application process. Online lenders received relatively low marks on repayment terms and interest rates, especially when compared to banks.

  • Full Report & Data