Small Businesses Hold Fast To Aversion To Debt
WASHINGTON (AP) – Small business owners are holding fast to their aversion to taking on more debt, even though they're optimistic about the future.
That's the finding of a report on small business credit released last week by 12 Federal Reserve regional banks across the country. The report, based on a 2016 survey of businesses that have employees, found that about three-quarters of company owners used personal funds when their businesses needed cash, instead of seeking financing including loans. And only 19 percent of companies expect to increase their debt level this year, down from 34 percent that did so in 2016.
The number of companies that sought financing in 2016 was little changed from the previous year, 45 percent versus 46 percent. But most of those companies sought relatively modest amounts of money — 55 percent wanted $100,000 or less, and three-quarters wanted $250,000 or less.
The survey asked companies that weren't seeking financing for their reasons. Nearly half said they had sufficient funds, while 27 percent said they didn't want to take on debt. Seventeen percent didn't apply for financing because they expected to be rejected.
The report found that small businesses were about as optimistic as in 2015, with 61 percent expecting their revenue to grow this year and nearly 40 percent expecting that they'll hire more workers.
The survey is in line with others conducted by banks and small business advocacy groups in recent months that show business owners are more optimistic, but not enough to make them step up their borrowing significantly. Many companies were either burned by high debt levels during and after the recession or want to avoid finding themselves unable to make their loan payments.
GETTING MORE RESULTS FROM MARKETING
Marketing can be expensive and time-consuming, but small businesses can do it more efficiently by using social media and taking steps to draw more visitors to their websites. SCORE, the organization that gives free counseling to small business owners, is sponsoring an online seminar with tips to help companies reach more customers.
It will be held Tuesday, April 25, at 1:00 p.m. Eastern time.
– by AP Reporter Joyce M. Rosenberg