Small businesses are still dealing with the after-effects of the Great Recession. Just one in five owners say their businesses have completely recovered, according to Bank of America’s latest Small Business Owner Report. Despite the lingering effects, American small business owners are optimistic for the future.
More than two-thirds of small business owners surveyed believes revenue will increase over the next 12 months. The majority (66 percent) plan to use that growth to expand their business within the next five years. With an eye toward growing their businesses in the future, many owners are willing to forgo personal needs today. Rather than delay employee compensation or reduce their workforce, many owners have taken on more (sometimes personal) debt or delayed their own compensation.
In the years following, the financial crisis credit was in short supply. Finally the lending freeze is beginning to thaw. Loan approval rates are on the rise. Applications are also increasing. The Bank of America report found a more than 10 percent increase in the number of business owners who had applied for a loan in the past two years. Age doesn’t seem to matter when it comes to seeking financing. Applications for businesses owned by baby boomers, Gen-Xers and millennials are up with applications increasing the most for Gen-Xers and the least among baby boomers. Nearly 1-in-5 small business owners plan to apply for a loan in this year. The growth from 2014 was driven by Gen-X owned businesses, 23 percent are eyeing a loan compared to just 17 percent last year. Loan intention of millennials and baby boomers remained flat.
Business owners are putting employees first. When asked how they planned to spend their loans, investment in employees was tied with investment in new equipment for the No. 1 spot. Intention to invest in new equipment was the only spending category to decline from 2014. Investment in employee training and development saw the largest increase, year-over-year, jumping 15 percent to the top of the list. Expanding operations, opening a new location or enlarging an existing one, hiring more employees and marketing rounded out the Top 5 ways small business owners plan to spend their loans.
A focus on employees was important to nearly all of the 1,000 businesses owners surveyed by Bank of America, but many are struggling to find employees that meet their needs. Two out of five owners say it’s difficult to find qualified candidates. The most common issue is finding potential employees with the specific skill set owners need. Other problems include employee salary expectations being too high and the workers choosing large or midsize companies over small business. Having difficulties hiring new employees, small business owners are increasingly opting to train and develop existing personnel. Among business owners who plan to apply for a loan in the next 12 months, 38 percent plan to use the funding for employee training and development, compared with 32 percent who plan to use the money to hire new staff.
Nearly a decade after the worst financial crisis of modern times, small business owners are working hard to move forward.
“Small business owners are optimistic about the future and are working extremely hard to achieve success,” Robb Hilson, Bank of America Small Business executive, said in a statement. “As they have focused on recovery, many business owners have embraced a mindset of self-sacrifice. They are prioritizing their employees and customers above all else and it is often at the expense of their own personal or financial well-being.”
Access to capital, or lack thereof is a key component in the success of small businesses, especially as owners plan to not only invest in equipment, but people, too.