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Small Business Owners and Credit

 Most small business owners indicate that credit is somewhat easy or very easy to obtain. The Wells Fargo quarterly optimism index shows that small business optimism has been on a steady rise since 2017. A survey done by Wells Fargo in May and June indicates little change in small business owners' views on credit

Relationship with Credit

  • According to the Small Business Credit Survey, in the last five years, 44% of small businesses had used a bank for funding, this indicates "a prior lending relationship."
  • According to the survey, "banking relationships are more common among larger firms, firms with better credit scores, and firms with white ownership."

  • Almost half of the firms covered in the Small Business Credit Survey had access to credit. According to the report, 49% of the firms had their financing needs met and only 30% had unmet financing needs.
  • According to a survey done by Wells Fargo in 2019, "53 percent of business owners indicated that credit was somewhat or very easy to obtain in the last twelve months, with the exact same number predicting this level of ease in obtaining credit in the coming twelve months." Only 1% of respondents indicated challenges in credit availability.
  • The Small Business Credit Survey shows that about 88% of small business owners rely on their personal credit scores to access credit.
  • Small businesses' top choices for credit are banks (large and small) and online lenders. 
  • The Small Business Credit Survey shows that some firms chose to decline approved financing (about 20% of firms that did not receive the full amount they applied for). Reasons for declining the funds include high-interest rates (73%) and unfavorable repayment terms (63%).
  • An extensive search in market reports, surveys, and media publications did not reveal any information on small business owners' views on short-term vs long-term credit.

Change in Recent Years

  • According to a survey done by the Federal Reserve Bank in 2019, small businesses' "optimism is near a 15-year high."
  • The Wells Fargo quarterly optimism index shows that small business optimism has been on a steady rise since 2017. The optimism takes into account financial factors of running a business including credit.
  • There has been a steady demand for new financing in 2018 and 2019. According to the Small Business Credit Survey, 43% of firms applied for credit in 2018 and 2019. About 40% of firms applied in 2017.

COVID-19 Impact

  • A survey done by CreditCards.com found that "35% of small-business owners in a survey said they’ve needed to tap their own funds." About 24% of those surveyed indicated that they have used personal credit cards and business credit cards (20%) to remain in business.
  • A survey done by Wells Fargo in May and June indicates little change in small business owners' views on credit. About 33% of small business owners interviewed indicated that obtaining credit in the last 12 months was totally easy, while 27% thought it was difficult. Their views for the next 12 months were almost the same, with 34% indicating that it would be easy.
  • The Wells Fargo survey shows that "half of the diverse owners say they applied for PPP loans, attempted to apply, or will apply again if additional funding is available, compared with 31% of nondiverse owners."

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