United States President Joe Biden speaks during an event in the Rose Garden of the White House to commemorate National Small Business Week on May 1, 2023 in Washington, DC.
Alex Wong | fake images
Small business owners are more optimistic heading into the year, even as they face lingering concerns about inflation and borrowing, according to a new survey released Thursday.
Seventy-five percent of small business owners are optimistic about their financial trajectory in 2024, up from 68% the previous year, 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 small business owners surveyed said they expect to create jobs this year, and 62% reported they anticipate profits to increase.
The survey adds to a recent spate of data showing that consumers and businesses have begun to have more confidence in the economy after a period in which inflation was persistent and borrowing became more difficult.
“The fact that 75% of small business owners are optimistic is a remarkably high number, considering that inflation continues to plague them, they continue to face capital access challenges and workforce issues… all of those challenges have been very difficult for the last few years without any 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.
'Growth opportunities' despite challenges
Jill Bommarito, CEO of Detroit-based Ethel's Baking Company, said she has seen strong consumer spending and noted that supply chain issues and inflation are easing. The wholesale baking company, which launched 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 doesn't mean we don't have headwinds… there's no doubt about that. However, the demand for real, authentic brands and services is there, and more than ever,” Bommarito said. He graduated from the Goldman Sachs 10,000 Small Businesses program, which provides business education and support services.
The survey also asked respondents to rank difficulties from the past four years. Interestingly, small business owners found 2023 almost as difficult as 2020: the peak of the pandemic and a time when many businesses were unable to 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, for a third of small businesses, they would say it was the toughest year they've ever had,” Wall said, citing inflation and chain problems. of supply that the owners faced. .
Inflation remains a major concern for business owners, even as the pace of price increases falls. Seventy-one percent of respondents reported that inflation pressures had increased over the past three months.
Rising prices jumped to the top of the list of small business concerns in the National Federation of Independent Business's monthly confidence reading in December, surpassing labor issues and regulations.
Part of the economic optimism in Goldman's data could be due to expected rate cuts by the Federal Reserve in the coming year, Wall said. On Wednesday, the Federal Reserve left interest rates unchanged and signaled it would not begin cutting them yet.
Main Street also focuses on the credit environment. amid high interest rates. About three-quarters, or 77%, of respondents to Goldman's survey said they were concerned about their ability to access capital.
The survey also asked about the final Basel III plans, which will increase capital holding requirements for larger and regional banks. The survey found that 86% of respondents said their growth forecast would be affected if it remains more difficult to access capital.
Goldman Sachs has come out against the Basel III Endgame proposal.
Additionally, about a third of homeowners surveyed said they believe they can afford to take out a loan. Of the 35% of respondents who applied for a loan in the last year, almost 80% had difficulty accessing affordable capital. And 40% received all the financing they requested.
Additionally, 28% of respondents who applied for loans said they had obtained a loan or line of credit with payment terms they considered abusive.
The recent NFIB survey also found that business owners were paying high interest rates, with the average rate paid for short-term loans reaching 9.8% in December, up from 7.6% in January 2023.
Bommarito said access to working capital is his main issue for 2024.
“We are the foundation of this economy,” he said of small businesses like his. “We are generally considered the riskier bet.”
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