Big Banks Find Big Optimism Amid Small Business Week — But Here’s The Catch

The Small Business Administration’s National Small Business Week is in full swing, and new data from top banks finds small business optimism is soaring.

Research from U.S. Bank released this week concluded that revenue increases, planned capital investments and boosted employment levels are all signs of strengthening SMEs across the U.S. The bank’s Small Business Annual Survey found 80 percent of small business owners identified their own business as “strong,” a data point that U.S. Bank dubbed a “historical high” for the survey.

Furthermore, 38 percent reported increased revenues, the highest portion in eight years.

U.S. SMEs are more optimistic about the national economy than they were last year, with 18 percent saying they feel the economy is expanding — double the amount that said the same a year ago. More than a quarter said they predict national economic expansion by early next year.

“Business owners are gaining confidence in the economy,” reflected U.S. Bank Vice Chairman of Consumer and Business Banking John Elmore in a statement. “For most owners, the recession is long over and now they’re making plans to expand.”

U.S. Bank’s research follows last week’s data released from Bank of America (BofA) that similarly found rising optimism among the nation’s small business community.

Analysts at BofA described the turnaround in optimism since before the presidential election as a dramatic one; more than half of the small business owners surveyed said they expect the national economy to improve over the next 12 months, a significant increase from data collected between August and October of last year, which found just 31 percent of SMEs expected economic improvement.

There was a similarly significant increase in the number of small business owners who expect their own local economies to improve, with 50 percent holding this belief, up from 37 percent.

The data was collected between March and April of this year, Bank of America noted.

Hiring, Borrowing Offer a Different Angle

Despite overall optimism among small businesses, the latest research suggests the news isn’t all positive.

U.S. Bank’s research, conducted between January and February of this year, found that while small business owners are looking to “modestly” add more staff, 61 percent said they find it difficult to hire quality employees.

Bank of America, meanwhile, found that hiring plans have actually decreased since late last year, with just 18 percent of businesses planning to hire more staff — down from 25 percent between August and October of 2016.

“Owners have been getting more confident since the election, but they’re still cautious about making a commitment to new staffers until they see whether the Trump administration and Congress can deliver on promises like lower taxes and fewer regulations,” Bank of America said in its announcement of the survey results.

Uncertainty over regulations like taxes and healthcare are similarly causing small business owners to hold off on borrowing money, separate research revealed.

Data released from Thomson Reuters and PayNet this week found that small business borrowing essentially stalled in March, while the national economy overall grew just 0.7 percent in Q1 — its slowest pace of growth in three years, researchers noted.

PayNet Chief Executive and Founder Bill Phelan said there won’t be much enthusiasm among small business borrowers.

“They didn’t get sucked into all the euphoria of public markets,” he stated. According to PayNet, President Donald Trump’s efforts on tax reform have yet to make a significant impact on small business optimism.

National policy is a divisive issue for small business owners, found SME software company Womply in yet another report released this week.

“Donald Trump’s election as the 45th U.S. president has had a polarizing effect on small businesses, with optimists identifying Trump as their number three reason for confidence (behind customers and employees) and pessimists saying he’s their number one reason for concern,” Womply said in an announcement Tuesday, noting that tax reform is top of mind for small business owners.

While the overall message seems to be that small business optimism is on the rise, not every SME is on the same page — and that can make a significant impact on the future of a company.

According to Womply, optimistic small business owners are 3.5 times more likely to expand staff and boost payroll, while pessimistic SMEs are 6.5 times more likely to cut staff and employee pay.

“These findings suggest that the impact of small business confidence is enormous when aggregated nationally,” Womply concluded.

“In 2017, we’ll see a number of important conversations play out that will impact the collective psyche of American small businesses,” Womply spokesperson Brad Plothow said. “Local merchants are clearly tuned into current events and factor the broader economic and political landscapes into their business decisions. Small businesses will continue to drive economic and job growth in the U.S. as long as confidence and optimism remain high.”