Small Business Borrowers Poll - FEDERAL RESERVE BANK of NEW YORK

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Small Business Borrowers Poll

Overview
Key Findings
About the Data
About the Survey
Partners
A Day in the Life of a Small Business Owner

Demographics

Geography and Industry

Business performance mixed

41% applied for credit

Applicants sought small amounts

Successful applicants
were more experienced

Most applicants got partial credit or were denied

Half of non-applicants were discouraged

Discouraged firms self-finance

Half of applicants will reapply

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The Federal Reserve Bank of New York’s Office of Regional and Community Outreach polled small businesses about their business performance, financing choices, and borrowing experiences. The poll was conducted online and distributed through a network of local government and nonprofit partners.

Poll Questions

Adirondack North Country Association	Manhattan Chamber of Commerce

American Institute of CPAs	Minority Business Development Agency

Bronx Community College	Mohawk Valley SBDC

NYC Business Improvement Districts	Office of the New York State Governor

Bronx Chamber of Commerce	NJ Small Business Development Centers

Brooklyn Chamber of Commerce	NJ Builders Association

Business Council of NY	NJ Business & Industry Association

Chamber Alliance of the Mohawk Valley	NJBiz

New York City Council	New Jersey Economic Development Authority

Clinton Chamber of Commerce	New York City Department of Consumer Affairs

NYC Community Boards	North Country Chamber of Commerce

Community Capital Resources	North Warren Chamber of Commerce

Community Development Corporation of Long Island	NY Business Development Corporation

Connecticut Business and Industry Association	NYC Business Solutions Centers

Consulado de Mexico en Nueva York	New York City Department of Small Business Services

Development Authority of the North Country	New York City Housing Authority;

Development Corporation of Plattsburgh NY	Oneida County Convention and Visitors Bureau

New York City Economic Development Corporation	Oneida County Tourism

Empire State Development	Pratt Area Community Council

East Williamsburg Valley Industrial Development Corporation	Office of the Queens Borough President

Fulton Avenue Business Alliance	Queens Chamber of Commerce

Grand Central Partnership	Queens Economic Development Corporation

Hadley Business Association	Rising Tide Capital

Hague Chronicle	United States Small Business Administration

Hispanic Chamber of Commerce	Small Business Development Centers

Indian Lake Chamber of Commerce	St. Lawrence County Industrial Development Agency

Jay Community News	Staten Island Chamber of Commerce

Jefferson County Job Development Corporation	Sunset Park Business Improvement District

Kingston Avenue Merchants Association	State University of New York Institute of Technology

Long Island City Partnership	Ticonderoga Area Chamber of Commerce

Long Island Development Corp	Tompkins County Chamber of Commerce

Lower East Side Business Improvement District	Women Presidents' Educational Organization

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More than three years into the economic recovery, the number of small business loans stands at three-quarters of its 2008 peak. National data show that the number of small business loans—defined as $1 million or less—declined by 4.7 percent in 2011. Read more »

A closer look reveals that most of the recent decline was due to a drop in the number of microloans—those less than $100,000. While lenders report easing credit standards for large and medium-size firms, loan standards for small businesses have not changed in the last four consecutive Federal Reserve Senior Loan Officer Opinion Surveys.

As part of its regional and community outreach, the New York Fed monitors credit conditions by asking small business owners about their credit needs and experiences. In April/May 2012, we heard from 544 small businesses. Evidence from small business owners suggests that the recent drop in lending may be due in part to weaker firms self-selecting out of the credit market. Fifty-nine percent of firms did not seek any financing during the last year. Half of the non-applicants said they did not apply because they did not think they would be approved. However, the poll also suggests that the drop in microloans is not wholly due to lack of demand. In fact, applicants expressed strong demand for microloans—but firms also reported higher denial rates for these loans than for larger amounts.

Here are the key findings:

Self-selection out of the credit market
- 59% of firms did not apply for credit between May 2011 and May 2012.
- Half of non-applicants said that they did not apply because they did not think they would be approved. These firms were younger, smaller, had weaker sales, and less frequently identified a bank as a primary financing source.

Applicants sought small dollar loans but encountered limited supply
- 58% of applicants sought a microloan ($100,000 or less), most often for short-term working capital.
- However, denial rates were higher for firms seeking microloans than those seeking larger amounts. The credit profile of unsuccessful applicants included young age (5 years or less in business), weaker sales performance, and infrequency of strong bank relationships.

Partial credit was a common outcome
- 63% of applicants were able to get at least some of the credit they sought. However, only 13% percent of applicants indicated obtained the full amount of credit sought.
- Two-thirds of credit applications were denied, and the most sought-after product, lines of credit, had the highest denial rate: 87%.

Loan demand for Q3 and Q4 2012 is anticipated from re-applicants and previously discouraged firms
- Overall, 43% of respondents plan to apply for some form of credit in Q3 and Q4 2012.
- Of these, half are re-applicants who received only partial credit in 2011-12 but who resemble successful applicants in 2011-12.
- The other half of firms that intend to apply did not apply between May 2011 and May 2012. Their credit profile is more similar to that of recently unsuccessful applicants.

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Key Findings

Restoring health to the small business sector, and the credit necessary to support its recovery, are continuing concerns. While recent surveys indicate an easing of underwriting criteria, data also show a 10 percent decline in small business lending between Q1 2011 and Q1 2012.

View Key Findings »

A Day in the Life

The New York Fed visited three different companies and had in depth conversations with their owners. Explore what we learned about their goals, motivations, and challenges by clicking on each picture.

View interviews »

The Small Business Borrowers Poll asks small businesses in New York, New Jersey, and Fairfield County, CT about their business performance and financial and credit experiences. The poll is distributed through a network of civic and nonprofit partners. The poll generally captures the perspectives of smaller firms (typically fewer than 10 employees and under $5 million in annual revenues) who respond to the questionnaire.

In total, there were 544 poll respondents to the poll fielded in May 2012; however, it is important to note that the number of respondents to each individual question varied. The graphs featured on this page each identify the number of respondents (n=) for relevant questions. If the analysis required cross-tabulation of multiple questions, only firms which responded to all relevant questions were included.

Note on Poll Methodology: The poll is not a random sample and thus the information should not be interpreted as a statistical representation of small businesses in the Second District or the nation. Rather, the results should be viewed as suggestive and analyzed with awareness of potential methodological biases.

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Company Name:

Bundle

Who:

Allison O'Neill

Year Founded:

2008

What:

Infant and Toddler Clothing & Accessories

Where:

Soho, New York, NY

click on thumbnail to view more

Bundle
Allison O'Neill
New York, NY

The Shannon Group
Diane Costigan
New York, NY

Gogo's Garlic Dip
Yiorgos Samios
Queens, NY

DISCLAIMER: The views expressed by the small business owners in the interactive slides are their own and do not necessarily reflect the views of the Federal Reserve Bank of New York or the Federal Reserve System.

Here are the key findings:

Self-selection out of the credit market
- 59% of firms did not apply for credit between May 2011 and May 2012.
- Half of non-applicants said that they did not apply because they did not think they would be approved. These firms were younger, smaller, had weaker sales, and less frequently identified a bank as a primary financing source.

Applicants sought small dollar loans but encountered limited supply
- 58% of applicants sought a microloan ($100,000 or less), most often for short-term working capital.
- However, denial rates were higher for firms seeking microloans than those seeking larger amounts. The credit profile of unsuccessful applicants included young age (5 years or less in business), weaker sales performance, and infrequency of strong bank relationships.
Partial credit was a common outcome
- 63% of applicants were able to get at least some of the credit they sought. However, only 13% percent of applicants indicated obtained the full amount of credit sought.
- Two-thirds of credit applications were denied, and the most sought-after product, lines of credit, had the highest denial rate: 87%.

Loan demand for Q3 and Q4 2012 is anticipated from re-applicants and previously discouraged firms
- Overall, 43% of respondents plan to apply for some form of credit in Q3 and Q4 2012.
- Of these, half are re-applicants who received only partial credit in 2011-12 but who resemble successful applicants in 2011-12.
- The other half of firms that intend to apply did not apply between May 2011 and May 2012. Their credit profile is more similar to that of recently unsuccessful applicants.

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