Every month NFIB asks a number of questions of our members related to financing in the Small Business Economic Trends (SBET) survey.  So far, the survey does not show any signs that small business owners are having significant problems accessing credit.  For regular borrowers, very few are not able meet all their borrowing needs. And 50 percent of those surveyed explicitly stated that they did not want a loan.  For all owners, only four percent report that financing is their single most important problem which is close to the historical average. 

Their their most pressing business problem?  Something we know all too much about here in California – taxes.  And is it any wonder with voters in the state passing the largest tax hike in history last November?  Add the many local taxes and fees that were increased and you can see why financing is far down the list of concerns.  When small business owners are struggling just to keep up with the costs that government throws at them, it is a wonder they have time to do anything else.

It is important to recognize that the same report also suggests that the small business sector isn’t growing.  Small business owners remain quite pessimistic about the future  and this causes them to rein in spending and hiring.  According to NFIB Chief Economist Bill Dunkelberg, “The lack of leadership in Washington and the resulting uncertainty depresses consumers’ and business owners’ willingness to spend and invest, and make bets on the future.”  This only reinforces what business owners in California have been telling us for a long time – they need certainty in order to grow or expand their business.  Certainty on what they will pay in taxes, certainty in healthcare costs and certainty in employment costs.  And in California – all of those can change from one day to the next depending on what those in Sacramento do.  And if you are a business owner uncertain about the future, you probably aren’t looking for financing.

The SBET did show that borrowing was a bit more difficult during the recession due to increased paperwork and collateral requirements but most were able to secure adequate financing for their business. The main problem for most of the recovery (until recently) was poor/weak sales. While sales is still a significant problem more business owners are now reporting that government generated costs (taxes and regulations) are becoming a bigger issue, increasing the cost of operating a business.  And because of the weak economy and increased costs, fewer owners are interested hiring, making capital expenditures or expanding their business.  Once again – the burdens government places on business rears its ugly head.  In California, small business owners spend more time on average complying with regulations that larger businesses.  And that time could be better spent focusing on sales and growing their business.

Most business owners still feel that business conditions will not improve in the next six months so there is still little need for borrowing/ financing.  Certainly there are some borrowers who are having a difficult time accessing credit (whether because of depressed earnings, lower asset valuation, newer business, more stringent lending standards for some industries/regions) but it’s not a prevailing problems for most. Owners are preparing for higher taxes and full implementation of the healthcare law – both are seen as large negatives and hinder plans to expand.

So what is the message that our legislative leaders in Sacramento need to hear?  While many small businesses would like to be able to expand and need access to credit – they aren’t willing to do so now.  If there was certainty coming out of Sacramento and Washington D.C. that might change.