PROVIDENCE – Businesses are making 2022 the year of expansion and are ready to put more money behind their growth plans, according to a survey by JPMorgan Chase & Co. published on Wednesday.
Four in 10 small- and midsize- business leaders surveyed for the 2022 Business Leaders Outlook Survey expect to increase their credit needs in the coming year – the highest percentage in the last five years of the annual survey. Those record-level credit forecasts also come with increased optimism for their companies, industries and the overall economy, despite the mounting threat posed by the aggressive omicron variant of the COVID-19 virus.
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“I think the attitude of the business community is a little different than the average person listening to the news,” said James Glassman, head economist for JPMorgan Chase Commercial Banking. “They have learned how to navigate around this issue.”
Indeed, more than eight in 10 leaders of midsize businesses, and seven in 10 small-business leaders, are optimistic about their companies’ performances in the year ahead, which is higher than at this time last year, according to prior survey results. Just as many midsize businesses, and close to as many small-business leaders, anticipate revenue and sales will increase in the new year.
That holds true at home in the Ocean State, where a majority of the bank’s business clients and prospects are forecasting gains in the year ahead, said Christopher Stevens, JP Morgan Chase’s executive director for commercial banking. While the state is heavily reliant on the still-crippled hospitality and tourism industries, the “first in, last out” of economic downturns that has historically characterized Rhode Island doesn’t hold much weight under current circumstances, according to Stevens.
Nationally and in Rhode Island, most businesses have recovered from the economic consequences of COVID-19, with 70% of midsize businesses seeing profits at or above their pre-pandemic levels and more than half running at least the same operational capacity as before the pandemic hit, according to the survey.
Expansion into new markets or geographies, innovation and diversified products and more consumer demand are expected to further fuel growth in the year ahead, the survey found.
Business credit cards are among the ways businesses plan to finance these growth plans, named by nearly half of survey takers, followed by lines of credit.
More than two-thirds of small businesses also said they are interested in exploring online lending options, a 15% increase year over year.
While new financing needs might be in part a reflection of the end of federal and local business relief programs like the popular Paycheck Protection Program, it’s a stronger indication of economic recovery, said Glassman.
“Credit needs in 2020 were really more of a safety net,” he said. “Now what you’re seeing, aligns with general optimism, [is] that most of these guys are expecting to do better this year.”
This success and increased confidence comes in part thanks to changes forced upon companies over the last two years amid supply chain disruptions, workforce shortages and new consumer buying preferences.
Nearly two-thirds of midsized businesses have started to strategically stockpile supplies to protect against supply chain strangleholds, while over half added suppliers from new areas. One-third have changed materials or manufacturing processes or even stopped doing business with certain suppliers.
Higher wages are the top way businesses have sought to recruit and keep workers in a tight labor market, with eight in 10 midsize businesses and just under 40% of small businesses upping worker pay, or planning to. Flexible work environments and hours are also an increasingly popular strategy to combat the workforce shortage, adopted by more than four in 10 small and midsize businesses.
With consumers buying behind a screen now more than ever, nearly one-quarter of small businesses have added contactless payment while 22% increased sales through social media platforms. Just under one-fifth plan to move to nearly 100% e-commerce sales in the year ahead, up from 7% at this time last year.
Nonetheless, challenges remain, with economic uncertainty topping the list named by small businesses, followed by inflation and changes to consumer habits. Midsize businesses are most worried about the labor shortage, supply chain issues and increased costs for doing business.
Still, these problems are a welcome obstacle compared to the devastation many companies faced during the onset of the pandemic, more “hurdles than potholes,” according to Glassman.
“I think businesses are really on offense rather than defense,” he said.
The survey reflects results from 2,600 business leaders across various industries. Small businesses are defined as those with annual revenue between $100,000 and $20 million, and midsize businesses are those with annual revenue between $20 and $500 million.
