Access to bank loans for small businesses climbed last quarter signaling strength and optimism in the economy, according to the latest Private Capital Access Index (PCA Index) from Dun & Bradstreet and Pepperdine Graziadio Business School. Fifty-five percent (55%) of surveyed businesses reported successful financing with a business bank loan, a record high since the PCA Index began in 2012.
Women-owned small businesses, however, are not faring as well when qualifying for bank loans as only 18% reported bank loan financing success in the previous quarter. Women-owned small businesses are also facing challenges with receiving payments from customers, with 28% reporting that their trade accounts have slowed down compared to last quarter. In contrast, 23% of small (<$5 million in revenue) and mid-sized ($5 – $100 million) companies reported that their trade accounts have slowed in payment over the last three months.
When asked if the current business financing environment is affecting their business’ health, 57% of women-owned small businesses affirmed its hindering their growth (compared to 42% of all surveyed small and mid-sized businesses), and 58% agree it’s restricting their ability to hire employees (compared to 39% of all small and mid-sized businesses). Similarly, 24% of women-owned small businesses reported that additional Federal interest rate hikes would restrict their growth (compared to 21% of all small and mid-sized surveyed companies), and 15% believe it would inhibit their ability to raise capital (versus 11% of all small and mid-sized businesses).
“Given the current climate of bringing awareness to the equality issues women have faced, it’s not surprising to see that women-owned small businesses are facing challenges beyond what their male-owned counterparts are reporting,” shared Nalanda Matia, lead economist at Dun & Bradstreet. “It’s important to shine a light on these results as it can help affect change and provide additional resources to support the 12.3 million women-owned businesses in the U.S.”
When it comes to demand for financing, however, all surveyed businesses are reporting a decrease in demand for capital. The Private Capital Demand (PCD) Index decreased by 12% for small and mid-sized businesses since last quarter. When looking into the upcoming year, 11% of small businesses cite accessing capital for growth as their most significant challenge in comparison to only 6% of mid-sized counterparts.
“Small businesses appear to be protecting their bottom line and growing with funds in place,” said Dr. Craig R. Everett, director of the Pepperdine Private Capital Markets Project. “In this economy, if small businesses can gain customers and maintain positive cash flow, they may choose to grow organically rather than seek credit to pursue a more aggressive growth strategy.”
Despite demand being down, businesses are closing out the year with momentum into 2019, with 81% reporting their 2019 business performance expectation is better than how they performed in 2018. Eighty-eight percent (88%) of responding businesses also share confidence in that their business will grow in the upcoming year.
FEW SMALL BUSINESSES HAVE NATURAL DISASTER PLAN
Operating a small business is not without its risks. In the face of a year fraught with ongoing natural disasters from coast to coast, the majority of businesses (58%) still do not have plans established in case of a natural disaster. Thirty-percent (30%) of businesses surveyed that were affected by natural disasters in the last 12 months reported making late payments post-disaster, and 18% of impacted businesses had to seek additional financing due to the negative impact.
TARIFFS A NON-ISSUE
When asked about the potential impact the retaliatory tariffs from China on U.S. goods will have on their business, 63% anticipate being impacted in a range from very little (23%), some (26%), very much (7%) and a lot (6%).
RETAINING CUSTOMERS, ATTRACTING WORKERS A TOP CONCERN
Overall, heading into a new year, small and mid-sized businesses focus will be on finding/retaining customers (25%) and attracting a quality workforce (23%), which are the highest perceived challenges. Increasing investments in technology and innovation is how 24% of mid-sized businesses plan on seizing as the biggest opportunity for their company’s growth in 2019, followed by diversification (22%).
The PCA Index is a quarterly indicator produced by the Pepperdine Graziadio Business School and Dun & Bradstreet. The Q4 2018 Index report was derived from 878 completed responses collected between October 2 – 18, 2018.
About Dun & Bradstreet
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About Pepperdine University Graziadio Business School
Anchored in the core values of integrity and innovation, the Pepperdine Graziadio Business School challenges individuals to think boldly and drive meaningful change that positively impacts their organizations and communities. With an entrepreneurial spirit, the Graziadio School advances experiential learning in small classes that deepen connections and stimulate critical thinking. Through our wide continuum of MBA, MS and executive degree programs offered across six California campuses, Graziadio faculty inspire full-time students and working professionals to realize their greatest potential as values-centered, Best for the World Leaders.