News & Resources

NFIB: Small business credit elusive and varied

Apr 11, 2012 Walt Wojciechowski

The credit outlook for small companies waned slightly in March, according to the latest Small Business Optimism Index from the National Federation of Independent Business (NFIB). While overall financing trends have shown marked improvement in the years since the recession ended, the market remains somewhat dry with many borrowers unable to access credit. Consumers, on the other hand, have been racking up debt in response to a tepid job market mixed with high student loans and increased credit card offers. But it's the debt situation among small business owners that has many analysts worried. As small firms account for roughly half of private sector employment, many economists and market advocates have been pushing banks to loosen their credit standards and increase their lending volumes. According to the NFIB, a net -11 percent of surveyed small business owners expect credit conditions to improve over the next three months, marking a 1 point dip from the February report. On top of this, the overall index declined 2 points last month to reach 92.5. "March came in like a lion, with Main Street seeing significant job growth in March - but it appears to have gone out like a lamb, and with no cheer in the forward-looking labor market indicators," said NFIB chief economist Bill Dunkelberg. "What could have been a trend in job growth is more likely a blip." However, for a considerable portion of respondents, credit availability does not appear to be a concern, with only 4 percent of small business owners citing financing as their top challenge. Rising prices also are weighing down on market sentiment. Last month,  9 percent of the 757 respondents said inflation was their top business problem. "Reports of increases in average selling prices are rising and 21 percent of the owners plan to raise their selling prices in the coming months," Dunkelberg added. "Overall, it appears that small business owners have reduced inventories to acceptable levels given the outlook for sales growth. Without improved sales, there is little motivation to order new inventory." However, alternative credit lenders may note an increase in demand, as firms seek measures to sustain growth or productivity.