NEW YORK—Rising operating and financing costs, and challenges obtaining credit, are hindering small business growth, according to a survey conducted by the Federal Reserve Bank of New York.
The Small Business Credit Survey (SBCS) collects information from businesses with fewer than 500 employees in New York, New Jersey, Connecticut, and Pennsylvania about business performance, financing, and loan application experiences.
Two-thirds of firms that responded to the survey experienced increased operating costs in 2013 compared with 2012. A quarter of respondents said rising costs were their biggest growth challenge. At the same time, 40 percent of firms reported rising financing costs.
According to the survey, 40 percent of firms applied for credit in 2013, remaining around the same as the previous year.
While 39 percent of applicants sought credit to cover day-to-day operations, 30 percent wanted to use the funds to expand their business or invest. This was a significant increase on 2012, when almost all of the respondents said they wanted a loan to cover operating costs.
About 90 percent of the businesses sought loans under $1 million in 2013, and 51 percent sought loans under $100,000.
On average firms contacted three lending institutions, submitted three applications, and spent 33 hours applying for credit.
Fifty-eight percent of applicants received some or all of the credit they sought in 2013, roughly the same ratio as 2012.
The SBCS is distributed through civic and non-profit partners, including chambers of commerce, industry associations, and development corporations. A total of 835 businesses responded to the survey, which was conducted from April 3, 2014 to June 20, 2014.
Results were weighted to reflect the full population of small businesses in the four states of coverage along the dimensions of industry, age, employee size, and geography.