U.S. President Joe Biden speaks at the Rose Garden event at the White House to celebrate National Small Business Week on May 1, 2023 in Washington, DC.
Alex Wong | Getty Images
A new survey released Thursday found small business owners are more optimistic about starting the year despite persistent inflation and credit challenges.
Seventy-five percent of small business owners are optimistic about their financial trajectory in 2024, up from 68 percent a year ago, according to a survey by Goldman Sachs 10,000 Small Business Voices, a policy advocate for small business owners.
At the same time, 28% of respondents rated the economy as good or excellent, which is 9% more than a quarter ago.
More than half of small business owners surveyed said they expect to create jobs this year, and 62% said they expect profits to increase.
The survey adds to a series of recent data showing consumers and businesses are growing more confident about the economy after a period of stubborn inflation and tightening borrowing.
“The fact that 75% of small business owners are optimistic is a pretty high number, given that inflation continues to plague them, they continue to face capital challenges and workforce challenges … there’s been no real progress in the last few years,” he said. Joe Wall, managing director of government affairs at Goldman Sachs, to CNBC.
The survey was conducted in mid-January among more than 1,400 small business owners across the country.
Jill Bommarito, CEO of Detroit-based Ethel’s Bakery Company, said she saw solid consumer spending, citing supply chain issues and declining inflation. The wholesale bakery, which started in 2011 and now has 26 employees, specializes in dessert bars and sells at Whole Foods, Target and Costco.
“There’s room for growth. That doesn’t mean we’re not averse to conflict… there’s no doubt about that. However, real, authentic brands and services are in demand, and more than ever,” said Bommarito, director of business education and support services at Goldman Sachs 10,000 Small. A graduate of the business program.
The survey also asked respondents to rank the difficulty of the past four years. Interestingly, small business owners found 2023 to be as difficult as 2020 – the peak of the pandemic and a time when many companies were unable to operate. 35 percent of the respondents said that 2020 is the most difficult year, and 33 percent chose 2023.
“I don’t think most people would say that last year was the toughest year for a third of small businesses,” Wall said, citing inflation and supply chain challenges facing owners. .
Although the rate of price increases has slowed, inflation is still a major concern for business owners. 71 percent of those who took part in the survey said that inflationary pressures have increased in the last three months.
Rising prices topped the list of small business concerns in the National Federation of Independent Business’ December sentiment reading, topping labor issues and regulations.
Some of the economic optimism in Goldman’s data may be due to the Federal Reserve’s expected interest rate cuts next year, Wall said. On Wednesday, the Fed kept interest rates unchanged and signaled it would not start cutting rates just yet.
Main Street is also paying attention to the credit environment in light of high interest rates. Nearly three-quarters, or 77%, of respondents to Goldman’s survey said they were concerned about access to capital.
The survey also asked about Basel III Endgame plans, which will increase capital requirements for larger and regional banks. According to the results of the survey, 86% of respondents said that if access to capital becomes difficult, their growth forecasts will be affected.
Goldman Sachs opposes Basel III Endgame proposal.
Additionally, nearly one-third of owners surveyed said they believed they would be able to get a loan. About 80% of the 35% of respondents who applied for a loan in the last year had difficulty obtaining affordable capital. And 40% received all the funding they requested.
In addition, 28% of respondents who applied for a loan said that they took out a loan or credit line with payment terms that they considered predatory.
The latest NFIB survey also found that business owners are paying higher interest rates, as the average interest paid on short-term loans reached 9.8% in December, up from 7.6% in January 2023.
Bommarito said access to working capital is his top concern for 2024.
“We’re the bedrock of this economy,” he said of small businesses like his. “In general, we’re considered a riskier bet.”
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