NSBA survey: Small-business confidence eroding

A recent survey of small-business owners nationwide paints a grim picture of their economic condition, with the only glimmers of optimism coming from the hope that the economy has bottomed out and has no place to go but up.
“The ongoing erosion of confidence from traditionally upbeat entrepreneurs is a wakeup call to lawmakers that small business may not be able to tread water much longer,” said Todd O. McCracken, president of the National Small Business Association (NSBA), which in late July released the survey as part of its 2009 Mid-Year Economic Report.
“We’re struggling,” said Keith Ashmus, chair of the NSBA, noting that only 3 percent of small businesses surveyed in July reported a positive impact from stimulus packages. “America’s small businesses need and deserve better.”
The NSBA midyear report details the ongoing difficulty small businesses are facing because three key indicators – revenue, profits and employee size – all declined between December, when the last survey was done, and July.
The number of small businesses hiring new employees in the past 12 months dropped from 18 percent in December to 9 percent in July, the report said. The NSBA said small business is the leading creator of jobs in the United States, contributing 93.5 percent of all net new jobs in the last 20 years.
In the coming 12 months, 13 percent of business owners in July projected an increase in employees; 29 percent projected a decrease. This compares with December figures of 18 percent and 26 percent, respectively. “While this still results in a deficit for net job growth, there exists a slight hopefulness … that better days lay ahead,” the NSBA said.
Revenue and profits took an even bigger hit, with 66 percent of small businesses seeing a decrease in profits and 62 percent, a drop in revenue, in July. In December, 51 percent of small businesses cited a decrease in profits and 45 percent, a drop in revenue – so July marked the first time that “a majority of small-business respondents cited revenue decreases” since the question was first asked in 1993 surveys, the NSBA said. Timing of the NSBA survey could be key to interpreting the results. The survey was conducted electronically June 24 through July 7 among 300 NSBA members. In late July, the Federal Reserve in Boston reported that the downturn in the New England economy may have bottomed out in June and July.
Regarding the credit crunch, 80 percent of small-business owners surveyed in July were negatively impacted, up from 67 percent a year ago, the NSBA report said. Some 68 percent reported worsening terms on credit cards and 38 percent cited a decrease in lines of credit or credit loans. There was, however, an increase in the percentage of small businesses using traditional bank loans, 53 percent in July compared to 44 percent in December.
“Due in part to lower interest rates and other incentives attached to loans, the increased reliance on bank loans also reflects that more businesses are turning to outside sources of financing as the difficult economy has forced them to use up business savings and earnings,” the NSBA said.
Rhode Island was one of the first states affected by the recession and “probably will be one of the last to come out of it,” said Grafton “Cap” Willey IV, who chaired the NSBA in 2007 and is manager of the state chapter of the Smaller Business Association of New England (SBANE). Based in Providence, Willey is manager director of CBIZTofias, one of the nation’s largest accounting firms. Although some reports cautiously indicate the economy may be improving, Willey said he wonders if the improvements have reached small businesses yet. “I do sense that companies are not as panicked, but still very concerned,” Willey said. “Access to capital is still an issue.”
Rhode Island officials in December proposed a $25 million state guarantee – later cut to $15 million – to back loans to small and medium-sized businesses in a stimulus package put together by Gov. Donald L. Carcieri and the R.I. Economic Development Corporation (EDC). But lawmakers did not go along with the guarantee, so participating banks stepped forward and began making the loans without it.
“Legislators were so focused on the budget that anything with a cost attached was not given the special attention it deserved,” Willey said. He said he is disappointed that the General Assembly did not support small businesses “when they needed it” and suggested that lawmakers missed an opportunity “to make an investment in Rhode Island.”
Tom Stocker, principal of the East Greenwich consulting firm Boardroom Advisory Group LLC, believes the economy hit bottom in May. He recently completed an impromptu survey of headlines in New England business journals, including Providence Business News, and suggested the headlines both affect and reflect reality. Headlines, he said, have been improving in recent months.
In his consulting business, Stocker reported that within the last month he’s fielded inquiries from two new clients working to expand their companies, both in the manufacturing sector. &#8226