Small Business Confidence On The Mend

U.S. small business confidence took a major hit recently, as the optimism levels of SME owners plummeted to a 15-month low of 94.1 in June, down from 98.3 the month prior.

But the latest Small Business Optimism Index results show small business confidence made a slight comeback in July.

The National Federation of Independent Business (NFIB) announced today the optimism index is up 1.3 points to 95.4, based on the roughly 1,495 businesses that took part in the survey.

“July has produced the most grudging of gains in the Index’s history and is still not above the 42-year average of 98.0, 99.5 through 2007. This leaves current readings just over two points below the average and five points below the December 2014 reading,” explained Bill Dunkelberg, NFIB Chief Economist.

According to NFIB’s Small Business Economic Trends for July, seven of the index’s 10 components increased last month, while the current inventory, expected credit conditions and earnings trends components continued to decline. This is in stark contrast to June’s Small Business Optimism Index results, where nine of the components used to calculate the score fell and just one remained unchanged.

The upswing in small business owners’ sentiment may have to do with some positive turns in the economy.

Recent automobile sales, employment and services sector data all point to continued economic momentum, along with the expansion of the gross domestic product at a 2.3 percent annual rate earlier this year, Reuters reported.

The Small Business Optimism Index found that small business owners are generally more optimistic about business conditions and the expectation of sales, which both showed improvement since last month’s report.

The rebound of small business owners’ confidence supports the most recent figures from the Biz2Credit small business lending index, which suggested small businesses appear to be improving their financial positions in the market.

New figures for June found that big banks and institutional lenders are climbing to new heights when it comes to SME loan application approvals.

Big banks approved more than one-fifth of SME loan applications (22.19 percent) in June this year, yet another increase from the month prior, which saw an approval rate of 21.9 percent. According to Biz2Credit, this is the eighth month in a row that mainstream large banks have upped their SME lending figures.

“Big banks are increasingly adopting digitization,” said Biz2Credit CEO Rohit Arora in a statement announcing the survey results last month.

“This makes them more efficient and is of benefit to borrowers, as well. These are the best numbers for big bank lending since the recession.”

SME lender Balboa Capital released the findings from its midyear survey last month which found that 65 percent of small businesses are optimistic about the future of the economy for the second half of the year.

“This speaks to the improvements in revenue and cash flow that small businesses experienced throughout the first six months of 2015,” said Balboa Capital Director of Marketing Jake Dacillo.

Nearly half of small business owners also agreed that the economy will end 2015 with higher growth. With such optimistic views about the near future of the economy, small businesses are acting accordingly.

Approximately one-third of respondents said they want to expand their business, while 20 percent said they want to procure new equipment or technology. According to Dacillo, “this is consistent with recently published economic and employment numbers as they relate to small businesses.”