Small business performance and financing success rates improved in 2017, according to the latest Small Business Credit Survey — a joint effort by the 12 regional Federal Reserve Banks — released today. More than half of firms surveyed reported that they were profitable at the end of 2016 and had seen increased revenues throughout the year. Seven in 10 said they expect revenue to grow in 2018, while just less than half expect to add more jobs.
Demand for financing was down from the 2016 survey, through those that applied for financing were more successful in 2017; 46 percent of firms that applied for financing in 2017 received the full amount they requested, compared to 40 percent in 2016. Traditional bank lending remains the primary source of financing for the nation’s small businesses, though the survey noted an uptick from the year before in borrowers who applied for financing through online lenders. Small banks approved at least some of the amount requested for 68 percent of credit applicants, while large banks approved credit for 56 percent of applicants.
In terms of borrower satisfaction, community development financial institutions rated the highest at 76 percent. Small banks and credit unions had net satisfaction ratings of 73 and 74 percent, respectively, and large banks had a 49 percent satisfaction rate, up slightly from last year’s survey.
Online lenders continued to rate well below banks and credit unions in terms of satisfaction, though they saw a significant year-over-year increase; satisfaction reached 35 percent among online lenders, up from 26 percent a year prior. Consumers cited high interest rates and unfavorable repayment terms as top reasons for dissatisfaction with online lenders. Among banks, long waits for credit decisions and difficult application processes were top reasons for dissatisfaction.