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small business credit survey report 2019

April 16, 2019

Small Employer Firms Say Revenues and Hiring Were Stronger For 2018, Though 2019 Outlook Is More Tempered

Federal Reserve Banks’ Headline Small Business Report Finds Strong Revenue and Employment Growth with Profitability Similar to Prior Year; Financing Demand Remained Stable, with Requests to Online Lenders Notably Increasing

The 12 Federal Reserve Banks today issued the Small Business Credit Survey: 2019 Report on Employer Firms, which examines the findings of an annual survey of small business owners nationwide. The Report focuses on small employer firms, businesses that have between 1 and-499 full- or part-time payroll employees (hereafter “firms”). It is the latest addition to the Reserve Banks’ hub for small business research and analysis,

Fielded in the third and fourth quarters of 2018, the survey finds that while both revenue and employment growth improved from 2017, the share of firms that is profitable remained the same. The outlook for 2019 is more tempered. While credit demand increased marginally in 2018, the share of firms receiving credit remained essentially flat. Startup firms and firms with high credit risk continued to have financing shortfalls. Online lenders1 in particular saw applications increase by approximately one-third from the prior year, even though applicants remained dissatisfied with the interest rates and terms offered, relative to traditional lenders.

Key findings can be found in the 2019 Report on Employer Firms executive summary. These findings include:

Performance and Expectations

  • The share of firms reporting revenue and employment growth increased from 2017, but the share of firms operating at a profit remained flat.
  • More than one-third of small firms (37%) added payroll employees in 2018.
  • Employment gains were strongest among startups, firms with five or more employees, firms with more than $1M in annual revenues, and firms with younger decision makers (46 years of age or younger).
  • A majority of firms (73%) saw input costs increase in the prior 12 months.
  • Expectations for 2019 are mixed with a majority of firms (72%) expecting revenues to increase but 44% planning to add employees.

Financial Challenges and Reliance on Personal Finances

  • Nearly two-thirds of firms (64%) continued to experience financial challenges, including difficulties with managing operating expenses, scarcity of credit, and challenges making debt payments.
  • Two-thirds of these firms (66%) relied on personal finances to cover their costs, while 40% of firms took out additional debt.

Financing Demand, Approvals and Sources

  • Respondents showed consistent year-over-year demand for new financing, with 43% of firms applying for new capital in 2018, similar to 40% in 2017.
  • Nearly half of applicants (47%) received the full amount of funding they requested, similar to the 2017 survey.
  • Financing shortfalls were particularly pronounced among firms with weak credit profiles, unprofitable firms, younger firms, and firms in urban areas.
  • Applications to online lenders continued their growth trend with 32% of applicant firms turning to such lenders in 2018, up from 24% in 2017, and 19% in 2016. These applicants expected online lenders would make faster funding decisions, would be more likely to provide funding, and would not require collateral.
  • Applicants who sought funding at large and small banks cited an existing relationship as the primary factor in their choice of lender.

Additional analyses from the 2018 Small Business Credit Survey will be released throughout 2019 at  Future releases will take an in-depth look into specific types of small businesses, including nonemployer firms, minority-owned firms, and firms operating in low- and moderate-income communities.

As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District — including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia — to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.


Takeaways Specific to Richmond Fed’s Region

The Richmond Fed’s region (the Fifth District) includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. Note that the bullets in this section include statewide data from the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and West Virginia. 

  • Fifth District firms were just as likely to have applied for financing in the prior 12 months as firms nationwide, with 43% submitting at least one application. Small banks made up a smaller percentage of these applications, with 36% of applicants in the Fifth District applying there, compared to 44% nationally.
  • Firms in the Fifth District were significantly less likely to report no revenue changes, with 16% having no change in revenues in the prior 12 months compared to 21% nationally. They were also less likely to report no employment changes (41%) than the entire country (49%). There was a larger likelihood that Fifth District firms did not have a change in input costs (26%) compared to firms nationwide (22%).
  • Fifth District firms were more likely to report an expectation of increasing employment in the next 12 months (49% compared to 44% nationally). A larger share of Fifth District firms (32%) prefer the future size of their business to be much larger compared to the rest of the nation’s preferences (27%).
  • Firms in the Fifth District were more likely to rely on retained business earnings (74%) and less likely on external financing (10%) than firms nationwide (69% and 13%, respectively).
  • Among nonapplicants, Fifth District firms were more likely to use a CDFI as a source for external financing (8%) compared to the national average (5%). They were also more likely to cite “Speed of decision or funding” as the largest factor in where they applied for credit, with 45% in the Fifth District noting this, compared to 34% nationally.


  • Firms in North Carolina were less likely to self-report as high credit risk, with 5% in North Carolina compared to 8% nationally.
  • Firms in North Carolina were less likely to report declining input costs (2%) than firms nationwide (4%).
  • A larger share of North Carolina firms prefer the future size of the business to be somewhat larger (62%) compared to the national average (53%).
  • Firms in North Carolina were less likely to apply for credit than firms nationally, 39% compared to 43%, respectively.
  • Among nonapplicants, North Carolina firms were more likely to use leasing for external financing (16%) than the national average (6%). A small share of nonapplicants use a line of credit (17%) compared to 40%, nationally. They also are more likely to cite a “Recommendation or referral” in their application decisions (21% vs. 15% nationally).
  • Among nonapplicants, firms in North Carolina were more likely to use CDFIs (19%) and less likely to use small banks (22%) and online lenders (6%) as a source for external financing compared to firms nationwide (5%, 37% and 10%, respectively).


  • Virginia firms were less likely than the national average to report no change in revenue at the end of 2017, 14% vs. 21%, respectively. They were also much more likely to report positive employment change than the national average, 49% vs. 37%, respectively. Further, Virginia firms were much more likely report no change in input costs (31%) compared to firms, nationally (22%).
  • A much larger share of Virginia firms are considered to be growing, with 45% compared to 31% nationally.
  • Virginia firms are more likely to use factoring as a form of external financing (9%) compared to the national average (3%).
  • Firms in Virginia were less likely to apply for credit than firms nationally, 40% compared to 43%, respectively.
  • Virginia firms were more likely to cite “No collateral required” in their application decisions, 37% vs. 26% nationally.
  • Among nonapplicants, Virginia firms were much less likely to cite “sufficient financing” (37%) as the reason for not applying for external financing in 2017 than the national average (49%).
  • Among nonapplicants, firms in Virginia were less likely to use online lenders (5%) as a source for external financing compared to firms nationwide (10%).

(Note: D.C., Md., S.C. and W.Va. estimates were not available due to insufficient sample size.)

About the Small Business Credit Survey (SBCS)

The SBCS collects information about business performance, financing needs and choices and borrowing experiences of firms with fewer than 500 employees. Responses to the SBCS provide insight into the dynamics behind aggregate lending trends and about noteworthy segments of small businesses. The results are weighted to reflect the full population of small businesses in the United States. The SBCS is not a random sample; therefore, results should be analyzed with awareness of potential methodological biases.

The SBCS includes experiences from firms across all 50 states and the District of Columbia through the joint efforts of the Federal Reserve Banks of New York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, Philadelphia, Richmond, San Francisco and St. Louis. The 2018 SBCS collected 12,455 responses in total, 6,614 of which were from employer firms.


The survey questionnaire asks about a range of nonbank online providers, including retail/payments processors, peer-to-peer lenders, merchant cash advance lenders, and direct lenders. For purposes of topline findings, nonbank online lenders are grouped into one category, “online lenders.”

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