Small Business Sentiment Dips Amid Borrowing and Hiring Troubles

America’s small business owners are feeling fairly pessimistic about the future.

The latest edition of the National Federation of Independent Businesses (NFIB) Small Business Optimism Index fell last month to 90.1, the agency announced Tuesday (April 11), as business owners contended with inflation, trouble borrowing, and difficulties finding workers.

According to a news release, this was the 15th straight month it was below the 49-year average of 98.

“Small business owners are cynical about future economic conditions,” said NFIB Chief Economist Bill Dunkelberg. “Hiring plans fell to their lowest level since May 2020, but strong consumer spending has kept Main Street alive and supported strong labor demand.”

The report found that 9% of small business owners said they had more trouble landing their last loan than in past attempts, a four point increase, while 3% said financing was their top business problem. About a quarter of owners — 26% — said they paid a higher rate on their most recent loan, up two points from the last survey.

“Rates are rising, but credit is still available,” the report said.

The inflation concerns cited by the NFIB were on display in the PYMNTS report “Main Street Health Q1 2023: Using Finance to Ease Recession Fears.”

According to the research for that report — done in tandem with Enigma — most small to midsize businesses (SMBs) have access to enough cash reserves to stay open for two months or less if their sales dry up or they encounter another cash flow shortfall.

The study found that 17% of these businesses have no access to funding at all.

“One sudden jolt in consumer demand puts these businesses at risk of closure, making it critical that these businesses consider pursuing financing options,” PYMNTS wrote.

According to the study, personal and consumer services and construction and utility businesses are the least equipped to deal with a shortage of cash, with 64% of personal services SMBs and 55% of construction and utility SMBs saying they had no financing options readily available.

In addition, SMB owners report they are worried about the risk of recession and say their limited cash reserves as inflation is cutting into their bottom lines — and their ability to pay employees.

“While 43% of Main Street SMBs say inflation is their most critical challenge and 23% consider economic uncertainty their primary challenge, Main Street SMBs face several other significant issues, many of which have changed in the last year,” we wrote.