Small Business Demand for Capital Has Hit A Four-Year High Despite Cautious Optimism for 2017
At the same time, bank loan success rates reached an all time low for small businesses and the success rate between small and mid-sized businesses (between
Both small (24 percent, up from 20 percent one year ago) and mid-sized businesses (37 percent, up from 28 percent one year ago) reported economic uncertainty as the lead reason preventing hiring. Businesses also reported that a Federal interest rate hike could negatively impact their operations, with 31 percent (up from 29 percent in 2015) of mid-sized businesses reporting a Federal interest rate hike could restrict their ability to secure contracts and expand to new markets.
Despite the reported lack of economic confidence, more small and mid-sized businesses are planning to seek financing than a year ago. Thirty-five percent of small businesses and 27 percent of mid-sized businesses are planning to raise capital in the next six months. Sixty-five percent of small businesses cited growth or expansion (up from 60 percent in 2015) as the reason for seeking capital, versus 56 percent of mid-sized businesses (up from 46 percent in 2015). Working capital fluctuations (62 percent small; 57 percent mid-sized) and increased demand (62 percent small; 46 percent mid-sized) rounded out the top three reasons for raising capital.
"This survey was conducted before the election. The economic uncertainty that comes with an election season is the driver behind small business' lackluster expectations going into the new year," said Dr.
Women-Owned Businesses Report Restricted Growth
Compared to the whole sample, women-owned businesses report that the current business environment is restricting their ability to grow (69 percent vs. whole sample 57 percent) and hire new employees (62 percent vs. whole sample 49 percent). Women-owned businesses perceive that it is more difficult to raise capital and both equity financing (71 percent vs. 62 percent whole sample) and debt financing (76 percent vs. 61 percent whole sample). The Q4 results show that women-owned businesses are in fact even less successful at securing bank loans than other businesses, with a 26 percent success rate compared to 37 percent for all businesses.
"Women-owned businesses employ nearly eight million people in the
Women-owned businesses are seeking to raise capital in the next six months at a higher rate than the whole sample, with 40 percent reporting that they plan to raise capital, compared to 34 percent whole sample. The leading reasons for the needed capital reported by women-owned businesses include financing future growth or expansion (74 percent) and growth due to expected increase in demand (70 percent). Sixty-nine percent of women-owned businesses cite working capital fluctuations as a reason for demand in financing compared to 60 percent of whole business sample.
The PCA Index is a quarterly indicator produced by the
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