SMALL BUSINESS STATUS REPORT
While startup businesses are more likely to add jobs than older, more established companies, more than half struggle to get credit that will help them grow.
That’s the finding of a report released last week by the Federal Reserve Bank of New York, which analyzed the results of a survey of business owners across the country. The report found that 43 percent of startups, companies 5 years old and under, were likely to add jobs and increase their revenues, compared with 22 percent of older businesses.
But 58 percent of companies 2 years old and under reported they had a difficult time getting credit, and 53 percent of companies 3 to 5 years old also had problems. That compares with 39 percent of older businesses. Nearly 70 percent who did get financing didn’t get all that they needed, compared to 54 percent of older enterprises. The most often-cited reason for not getting enough money: an insufficient credit history, a problem inherent in being a young company.
The survey shows that little has changed for small businesses since the Great Recession, which officially ended eight years ago. While owners are an optimistic lot, many find that banks aren’t willing to take a chance on a young business without a proven track record. The restrictions put on banks as part of the Dodd-Frank bill have made already wary banks even more cautious about lending to newer businesses. The Trump administration and Republicans in Congress want to change Dodd-Frank, which became law following the financial crisis.