The National Federation of Independent Business (NFIB) Research Center surveyed small-business owners by email July 20-26 about their banking activities and experience in accessing credit. The top area of concern cited by those surveyed is the rising cost of financing because of high interest rates.
“The health of the financial system is essential to small-business operations,” NFIB Research Center Executive Director Holly Wade said in a release. “While most owners are currently satisfied with their ability to borrow, the escalating cost of financing associated with high interest rates is a significant issue for many.”
Twenty-one percent of small-business owners surveyed said they borrowed or tried to borrow from a bank or credit union in the last three months. Of those borrowing, 32 percent were very satisfied with the amount and terms offered for the financing received, 33 percent were mostly satisfied, 19 percent were moderately satisfied, and 17 percent were not satisfied.
Over half (58 percent) of those who borrowed or tried to borrow reported high interest rates as their largest complaint in accessing financing. Fourteen percent said a too-low amount of credit being approved was their largest complaint, 9 percent reported the application, approval, or closing process was too slow, 7 percent reported too much paperwork, 6 percent said the repayment schedule was too short, and 3 percent reported collateral requirement was too big.
Two in five (40 percent) of owners said interest rates were a significant issue, around a quarter (23 percent) said it was a moderate issue and 13 percent said it was a mild issue.
More than half (56 percent) of those small-business owners who borrowed from a bank or credit union received a term loan and 37 percent received a line of credit. Of those who received a term loan, about half (51 percent) reported receiving a 3-to-5-year loan and 19 percent reported a 6-to-10-year loan. Another 10 percent reported the term as longer than 10 years.
Small-business owners’ concerns about the stability of their bank have eased significantly since the last NFIB survey in April. When asked how concerned they were about the health of the bank they use for business in light of recent bank failures, more than half (54 percent) were not at all concerned about the health of their bank, a significant increase from 31 percent in April. Four percent were very concerned, 13 percent were moderately concerned, and 29 percent were slightly concerned.
Seven percent said they reached out to their bank about stability concerns, 13 percent reported their bank reached out to them, and 80 percent reported said they did not reach out to their bank and their bank did not reach out to them.
Bank location is especially important to small-business owners, as 42 percent visit their bank in-person more than once a week and 35 percent visit several times a month. Only 8 percent said they use the phone or go online for their banking needs.
Slightly less than two-thirds (64 percent) of small-business owners use a small or regional bank, 18 percent use a large bank and 16 percent use a medium bank, according to the survey.
“In 1983 there were 14,469 independent banks; today, only 4,136 remain, according to the FDIC,” the NFIB survey report states. “The number of branches available has also declined as well from its peak in 2010 but not as much as the number of independent banks. … The decline in bank competition and banking disruptions are of concern. These issues have the potential to significantly disrupt and negatively impact the small business economy.”