U.S. President Joe Biden speaks during an event in the Rose Garden at the White House to mark National Small Business Week on May 1, 2023, in Washington, DC.
Alex Wong | Getty Images
Small business owners are more optimistic to start the year even as they face persistent inflation and credit concerns, a new survey released Thursday found.
Seventy-five percent of small business owners are optimistic about their financial trajectory in 2024, up from 68 percent a year earlier, according to a survey by Goldman Sachs 10,000 Small Business Voices, a policy advocate for small business owners.
Meanwhile, 28% of respondents rated the economy as good or excellent, up 9% from a quarter ago.
More than half of the small business owners surveyed said they expect to create jobs this year, and 62 percent said they expect profits to increase.
The survey adds to a recent string of data showing that consumers and businesses have begun to grow more confident about the economy after a period in which inflation has been stubborn and borrowing has become more difficult.
“The fact that 75% of small business owners are optimistic is a remarkably high number, given that inflation continues to plague them, they continue to face the challenges of accessing capital and labor issues.” .. all of these challenges have been very sticky for the last few years with no real progress,” Joe Wall, managing director of government affairs at Goldman Sachs, told CNBC.
The survey was conducted nationwide in mid-January among more than 1,400 small business owners.
Jill Bommarito, CEO of Detroit-based Ethel’s Baking Company, said she has seen solid consumer spending and noted that supply chain issues and inflation are easing. The wholesale bakery company, which started in 2011 and now has 26 employees, specializes in dessert bars and sells at Whole Foods, Target and Costco.
“There are opportunities for growth. That’s not to say we don’t face headwinds… there’s no doubt about that. However, the demand for real, authentic brands and services is there and more than ever,” said Bommarito, a graduate of the Goldman Sachs 10,000 Small Businesses program, which provides business education and support services.
The survey also asked respondents to rank the difficulty over the past four years. Interestingly, small business owners found 2023 almost as tough as 2020 — the peak of the pandemic and a time when many companies could not operate. Thirty-five percent of respondents said 2020 was their most challenging year, while 33% chose 2023.
“I don’t think most people appreciate the fact that last year was, for a third of small businesses, they would say it was the hardest year they’ve had,” Wall said, citing inflation and supply chain issues , faced by the owners.
Inflation is still a major concern for business owners, although the rate of price increases is falling. Seventy-one percent of respondents reported that inflationary pressures had increased in the past three months.
Rising prices jumped to the top of the list of small business concerns in the National Federation of Independent Business’ monthly sentiment reading in December, ahead of labor issues and regulations.
Some of the economic optimism in Goldman’s data may be due to expected interest rate cuts by the Federal Reserve next year, Wall said. On Wednesday, the Fed left interest rates unchanged and signaled it would not begin cutting rates just yet.
High Street is also focused on the lending environment against the backdrop of high interest rates. About three-quarters, or 77 percent, of Goldman’s survey respondents said they were concerned about their ability to access capital.
The survey also questions plans for the Basel III endgame, which will increase capital requirements for larger and regional banks. The survey found that 86% of respondents said their growth forecast would take a hit if access to capital continued to become more difficult.
Goldman Sachs has come out against the proposal to end the Basel III game.
In addition, only about a third of homeowners surveyed said they thought they could afford to take out a loan. Of the 35% of respondents who applied for a loan in the last year, nearly 80% find it difficult to access affordable capital. And 40% got all the funding they asked for.
In addition, 28% of respondents who applied for loans said they took out a loan or line of credit with payment terms they considered predatory.
The recent NFIB survey also found that business owners are paying high interest rates, as the average interest rate paid on short-term loans reached 9.8% in December, up from 7.6% in January 2023.
Bommarito said access to working capital is her top concern for 2024.
“We’re the backbone of this economy,” she said of small businesses like hers. “In general, we’re just seen as the riskier bet.”
Don’t miss these stories from CNBC PRO:
