This week, the Federal Reserve Banks in collaboration released the 2016 Small Business Credit Survey: Report on Employer Firms, which provides timely information on small business financing needs, decisions, and outcomes.

To gain these insights, the Federal Reserve Banks partnered with more than 400 business organizations, including OFN who put out a call to Members in late 2016 to participate. Results from the survey demonstrate the continued trend of funding gaps and financial challenges faced by many small business owners.

Among the key findings were:

  • Higher approvals for smaller-revenue firms at community development financial institutions (CDFIs), small banks, and online lenders than at large banks. Borrower satisfaction among all applicant firms is highest at small banks, credit unions, and CDFIs.
  • The most common way firms cope with challenges is by self-funding—76% of business owners used personal funds to fill the gap. Firms also reported taking on additional debt (44%), making a late payment (44%), or downsizing (43%).
  • Persistent credit gaps for smaller-revenue firms (annual revenues of $1M or less), stemming in part from weak credit scores and insufficient credit histories.
  • Forty-two percent of small businesses rely exclusively on their owners’ personal credit scores to secure debt; another 45% use both the owners’ personal scores and business credit scores. Among larger revenue firms, 25% rely exclusively on the owners’ personal credit scores and another 53% use a personal credit score in combination with a business credit score.

CDFIs who participated can look forward to a custom report that compares their borrowers’ responses to those from all small businesses that completed the survey. Read the full report here.




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