Researchers at Dun & Bradstreet Credibility Corp. and Pepperdine University released a survey showing that small business owner borrowing has remained flat from the first quarter of 2012 to the third quarter of 2012. According to the Private Capital Access Index (PCA) business owners are remaining cautious and demand for financing was flat, with 32 percent of businesses reporting that they had recently tried to obtain financing. This is the same percentage as the first quarter of this year, the last time that D&B conducted their survey.
The reading for American small business net capital spending intentions as measured by the Wells Fargo/Gallup Small Business Index for the fourth quarter of 2012 has tumbled to its lowest levels in 2 years. This suggests that capital investment will drop further in 2013 given the pessimistic attitude of small business owners.
"These most recent PCA results suggest that businesses and lending institutions alike see clouds on the economic horizon, with responses trending in a way that points to general economic weakness," said Dr. John Paglia, director of the Pepperdine Private Capital Markets Project and associate professor of finance at Pepperdine University's Graziadio School of Business and Management. "Our index data indicate that business owners are very cautious right now, and that their demand for financing, plans for growth, and expected hiring are all down."
"At the Lending Circle, our clients express these very doubts and fears," said Terry Robinson, President of Sunovis Financial and its division The Lending Circle. "I will add, however, that many businesses have tried and failed to get bank loans or credit since the 2008 crash. This has discouraged many, who have stopped trying to obtain needed capital, and that has hurt small business growth. The new Micro Loans are helping some small businesses address this problem."
Most results of the survey were little unchanged from the version conducted in the first quarter of 2012. Seventy six percent of the small business owners surveyed said it was difficult to obtain a loan in the third quarter. This is almost unchanged from the seventy seven percent who cited difficulties obtaining loans in the first quarter.
Growth was seen to be restricted by tight credit conditions by sixty three percent of those surveyed, virtually unchanged from the sixty four percent who made the same statement in the first quarter. Hiring is also being affected, with 53 percent responding that tight credit conditions were hampering their ability to hire, a slight drop from the fifty five percent who responded this way in the first quarter.
“Both small business owners and financial institutions seem to be looking at the landscape and feeling better times are just too far in the future to be supportive of plans for growth,” said Jeffrey Stibel, Chairman and CEO of D&B Credibility. “Until they have a greater sense of certainty about what to expect in terms of economic conditions, the economy may have to wait to get the jumpstart it needs.”
This survey is a confirmation of other recently released surveys showing a reluctance on the part of small business owners to borrow money, hire and expand. A combination of the weak economy, uncertainty about the presidential elections, and now uncertainty about the fiscal cliff issue in the U.S. continue to place pressure on small business optimism, growth plans and borrowing.