WASHINGTON, May 22 (Reuters) - Small U.S. businesses experienced rising profitability, increased confidence, and easier access to financing in 2017 amid a continued economic recovery, the Federal Reserve’s regional banks reported on Tuesday in an annual survey of small firms.
Of roughly 8,000 companies responding to an online questionnaire, 72 percent expect revenue to grow in 2018 and 48 percent expect to add employees, both up slightly from last year’s survey.
Among firms seeking financing 59 percent wanted to expand, down slightly from last year but a fact that the Fed officials who conducted the survey say still pointed to overall economic strength. As of 2011, shortly after the end of the 2007 to 2009 recession, a small business poll found only 31 percent sought financing to expand.
Fewer firms felt the need to seek outside financing, with only 40 percent looking for outside funding, down from 45 percent last year.
The survey pointed to continuing challenges. Of the 64 percent of small businesses that reported trouble paying operating costs, buying inventory or making debt payments, two-thirds relied on an owner or investor’s personal funds.
The smallest firms, startups, and minority-owned businesses struggled the most. About 74 percent of firms with less than $100,000 in revenue had trouble paying their bills, but a majority were either averse to borrowing or worried they would be turned down and so did not apply for a loan or other credit.
Still, the results were in line with other surveys that have found optimism among business owners as a decade long recovery continues.
In an essay released with the survey, outgoing New York Fed President William Dudley said that with small businesses responsible for the majority of job growth, the improvement in confidence and performance should not mask the difficulties those firms face.
Among firms that sought funding last year, 46 percent received all they requested, compared to 40 percent last year.
“Even small businesses with the potential for strong growth are struggling to get sufficient financing,” Dudley said.
The online survey was conducted in the second half of 2017, before a recent change in the tax law that cut corporate taxes and made other changes that may advantage smaller business.
The survey received responses from 8,169 firms with at least one and fewer than 500 employees. The credibility interval differed by question but ranged from plus or minus 1.4 percentage points to plus or minus 2.5 percentage points. (Reporting by Howard Schneider Editing by Chizu Nomiyama)