Federal Reserve Banks' - Small Business Credit Survey
FEDERAL RESERVE BANKS’ SMALL BUSINESS CREDIT SURVEY, 2018 Key Findings Claire Kramer Mills, PhD AVP, Outreach & Education November 12, 2019
Agenda Overview of Small Business Credit Survey Key takeaways Small business optimism is near a 15-year high. Demand is strong for small dollar (under 1M) financing, yet small dollar loans have grown sluggishly. Key small business segments have difficulty securing bank financing and are turning to online sources of credit. Partnerships and future work 2
Small Business Credit Survey overview Responses from National network of Survey length The respondents 50 states 300 partners 10-12 mins 6,000 employer firms 6,000 nonemployer firms Includes information about: – Minority-owned businesses – Women-owned businesses – Veteran-owned businesses – 50 entrepreneurs – Micro businesses 3
Small business optimism has rebounded Small business optimism 110 110 105 90 100 70 50 95 30 90 10 85 -10 -30 2003 NFIB optimism index Wells Fargo optimism index 130 80 2004 2005 2006 2007 2008 2009 Wells Fargo Optimism Index 2010 2011 2012 2013 2014 2015 2016 2017 2018 NFIB Optimism Index (Not Seasonally Adjusted) Source: Wells Fargo/Gallup Small Business Index, National Federation of Independent Businesses Note: Wells Fargo data are quarterly; not seasonally adjusted. NFIB data are not seasonally adjusted. 4
Small dollar lending has remained flat Outstanding balances on loans to businesses 2,800 Billions of 2,400 2,000 1,600 1,200 800 400 2006 2007 2008 2009 2010 2011 Small loans to businesses 2012 2013 2014 2015 2016 2017 2018 Large loans to businesses Source: FFIEC Quarterly Banking Profile; Does not include institutions exempt from CRA reporting 5
KEY FINDING: Half of small businesses met their funding needs, but this varies across segments Proportion of small business owners with funding needs met (% of employer firms) 51% Non-Hispanic white-owned 50% Men-owned 48% All firms 43% Women-owned 31% Hispanic-owned Non-Hispanic Black or African American-owned Source: 2018 Small Business Credit Survey 28% 6
KEY FINDING: Credit is the most common form of financing regularly used by small firms. In contrast, 7% use equity investments Type of financing regularly used (% of employer firms) 55% 52% 7% of firms use equity investments for financing their business. 20% 13% 9% 7% 6% 3% All small employer firms Loan or line of credit Credit card Source: 2018 Small Business Credit Survey Trade Leasing Equity Cash advance Factoring Does not use external financing 7
KEY FINDING: Small firms have small dollar needs. 71% sought 100K or less in funding Total amount of financing sought by revenue size of firm (% of applicants) 44% 28% 27% 24% 24% 18% 17% 10% 5% 3% 1M Revenue firms 25K or less Source: 2018 Small Business Credit Survey 25K- 100K 1M Revenue firms 100K- 250K 250K- 1M More than 1M 8
KEY FINDING: Firms seeking 100K or less applied to online providers at equal rates to banks Credit sources applied to by amount of credit sought (% of loan/line of credit and cash advance applicants) 61% 56% 55% 45% 42% 38% 39% 30% 18% 10% 6% 6% Sought 100K or less Source: 2018 Small Business Credit Survey Small bank Online lender 4% Sought More than 250K Sought 100,001– 250K Large bank 10% 7% CDFI Credit union 9
KEY FINDING: Medium- and high-risk borrowers applied to online lenders at higher rates than to banks Credit sources applied to by credit risk of firm (% of loan/line of credit and cash advance applicants) 51% 54% 50% 48% 41% 19% 6% 4% Large bank Small bank Online lender Low credit risk Source: 2018 Small Business Credit Survey CDFI 9% 12% Credit union Medium/high credit risk 10
KEY FINDING: The chance of being funded is a larger factor than cost in where firms apply for financing Top factors influencing where firms apply (% of loan/line of credit and cash advance applicants) 70% 60% 50% 40% Chance of being funded 30% Cost or interest rate 20% Speed of decision or funding 10% Recommendation or referral 0% Large bank Small bank Source: 2018 Small Business Credit Survey Online lender CDFI Credit union 11
KEY FINDING: Segments of small business borrowers differ notably in where they apply for financing Credit sources applied to by type of firm (% of loan/line of credit and cash advance applicants) 60% 50% 40% All small employer firms 30% Women-owned 20% Hispanic-owned 10% Non-Hispanic African American-owned 0% Large bank Small bank Source: 2018 Small Business Credit Survey Online lender CDFI Credit union 12
Intelligence on key segments of small business www.fedsmallbusiness.org 13
Appendix Methodology Statistics on economic importance of small business Additional findings from Small Business Credit Survey 14
Methodology Convenience sample, conducted online Distributed through 300 community and business organizations Collaboration with NORC at the University of Chicago Control for representativeness by weighting the sample data with U.S. Census data Weighting characteristics: firm age, number of employees, geography, industry, race, ethnicity, and gender. Number of Employees (% of employer firms) Revenue Size of Firm (% of employer firms) N 6,614 55% N 6,376 51% 26% 20% 18% 13% 1-4 employees 5-9 employees 9% 4% 5% 10-19 employees 20-49 employees 50-499 employees 100K or less 100K- 1M 1M- 10M More than 10M 15
Why small business? Generate 2 of 3 net new jobs in the U.S. Large community impact in low income areas 43% Location of U.S. small businesses Lowerincome zip 1.87 trillion in annual revenues 57% Middle- or upperincome zip US Census Bureau, Statistics of US Businesses, 2016 Association for Enterprise Opportunity, The Big Picture: A Larger View of the Small Business Market 16
Credit Challenges Credit challenges by type of firm (% of applicants not approved for at least some of the financing sought) 44% 40% 39% 37% 36% 33% 33% 32% 31% 35% 34% 35% 34% 32% 37% 23% 25% 22% 23% 11% Low credit score Insufficient credit history All Firms Source: 2018 Small Business Credit Survey Insufficient collateral Black or African-American Too much debt already Women-owned Weak business performance Hispanic 17
Credit Application Sources Credit Sources Applied To % of applicants 60% Large Bank Percent of Applicants 50% Small Bank 40% Online Lender 30% Credit Union 20% CDFI 10% 0% 2016 (N 3,771) 2017 (N 2,818) 2018 (N 2,379) Source: 2018 Small Business Credit Survey 18
Lender Approval Rates Approval Rate By Lender (% of applicants approved for partial or full credit) 85% 80% 75% 70% 65% 60% 55% 50% 2016 Online Lender (N 517-672) Source: 2018 Small Business Credit Survey 2017 Small Bank (N 1,034-1,781) 2018 Large Bank (N 1,103-1,837) 19
Success rates of Borrower Segments by Lender Success Rate (% of applicants being partly or fully funded) 85% 84% 73% 58% 70% 64% 60% 65% 50% 40% 42% 29% Large bank Women Small bank Non-Hispanic White Non-Hispanic Black or African American Online lender Hispanic Source: 2018 Small Business Credit Survey 20
Overview of Small Business Credit Survey Key takeaways Small business optimism is near a 15-year high. Demand is strong for small dollar (under 1M) financing, yet small dollar loans have grown sluggishly. Key small business segments have difficulty securing bank financing and are turning to online sources of credit.
Division of country into twelve federal reserve dis-tricts, 28-29.—Membership in federal reserve system. 29-31,—Democracy of federal reserve banks* plan of or-ganization, 31-34.—Coordination of twelve federal reserve banks and centralization of their control provided for by means of federal reserve board, advisory council, and class
13. Deposits of commercial banks at the Federal Reserve Bank are called A. bankers' acceptances. B. repurchase agreements. C. time deposits. D. federal funds. E. reserve requirements. 14. The interest rate charged by banks with excess reserves at a Federal Reserve Bank to banks needing overnight loans to meet reserve requirements is called the
FEDERAL RESERVE SYSTEM Docket Number OP-1573 Request for Information Relating to Production of Rates AGENCY: Board of Governors of the Federal Reserve System. ACTION: Notice and request for public comment. SUMMARY: The Board of Governors of the Federal Reserve System (Board) is considering the production and publication of three rates by the Federal Reserve Bank of
Careers at the Federal Reserve Board Careers at the Federal Reserve Board. The Central Bank of the United States Washington, DC. About the Federal Reserve Congress created the Federal Reserve more than 100 years ago and charged it with fostering a . healthy domestic economy and a sound banking system.
The Federal Reserve is the current central banking system of the United States of America. In 1913 Congress passed the Federal Reserve Act, which established the Federal Reserve. One of the most influential proponents of this act was Robert L. Owen, a senator from the young state of Oklahoma. Today, the Federal Reserve has a complex, but important,
22. Kendall-Frost Mission Bay Marsh Reserve 23. Scripps Coastal Reserve SANTA BARBARA 24. Carpinteria Salt Marsh Reserve 25. Coal Oil Point Natural Reserve 26. Kenneth S. Norris Rancho Marino Reserve 27. Santa Cruz Island Reserve 28. Sedgwick Reserve 29. VESR - SNARL (Sierra Nevada Aquatic
The central bank of the United States i.e., Federal Reserve, is a private banking cartel with a government façade. The individuals owning the Federal Reserve and the big private banks have one and only one goal - maximizing profits. You must realize and accept the cold and calculating nature of these people.
The threat profile for SECRET anticipates the need to defend against a higher level of capability than would be typical for the OFFICIAL level. This includes sophisticated, well resourced and determined threat actors, such as some highly capable serious organised crime groups and some state actors. Reasonable steps will be taken to protect information and services from compromise by these .
