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Press Release

Small employer firms say revenues and hiring were stronger for 2018, though 2019 outlook is more tempered

Federal Reserve Banks' small business report finds strong revenue and employment growth with profitability similar to prior year; financing demand stable, requests to online lenders notably increasing

The 12 Federal Reserve Banks today issued the Small Business Credit Survey: 2019 Report on Employer Firms, which examines the findings of an annual survey of small business owners nationwide. The Report focuses on small employer firms, businesses that have between 1 and 499 full- or part-time payroll employees (hereafter "firms"). It is the latest addition to the Reserve Banks' hub for small business research and analysis,

Fielded in the third and fourth quarters of 2018, the survey finds that while both revenue and employment growth improved from 2017, the share of firms that is profitable remained the same. The outlook for 2019 is more tempered. While credit demand increased marginally in 2018, the share of firms receiving credit remained essentially flat. Startup firms and firms with high credit risk continued to have financing shortfalls. Online lenders1 in particular saw applications increase by approximately one-third from the prior year, even though applicants remained dissatisfied with the interest rates and terms offered, relative to traditional lenders.

Key findings can be found in the 2019 Report on Employer Firms' executive summary. These findings include:

Performance and Expectations

  • The share of firms reporting revenue and employment growth increased from 2017, but the share of firms operating at a profit remained flat.
  • More than one-third of small firms (37%) added payroll employees in 2018.
  • Employment gains were strongest among startups, firms with five or more employees, firms with more than $1M in annual revenues, and firms with younger decision makers (46 years of age or younger).
  • A majority of firms (73%) saw input costs increase in the prior 12 months.
  • Expectations for 2019 are mixed with a majority of firms (72%) expecting revenues to increase but 44% planning to add employees.

Financial Challenges and Reliance on Personal Finances

  • Nearly two-thirds of firms (64%) continued to experience financial challenges, including difficulties with managing operating expenses, scarcity of credit, and challenges making debt payments.
  • Two-thirds of these firms (66%) relied on personal finances to cover their costs, while 40% of firms took out additional debt.

Financing Demand, Approvals and Sources

  • Respondents showed consistent year-over-year demand for new financing, with 43% of firms applying for new capital in 2018, similar to 40% in 2017.
  • Nearly half of applicants (47%) received the full amount of funding they requested, similar to the 2017 survey.
  • Financing shortfalls were particularly pronounced among firms with weak credit profiles, unprofitable firms, younger firms, and firms in urban areas.
  • Applications to online lenders continued their growth trend with 32% of applicant firms turning to such lenders in 2018, up from 24% in 2017, and 19% in 2016. These applicants expected online lenders would make faster funding decisions, would be more likely to provide funding, and would not require collateral.
  • Applicants who sought funding at large and small banks cited an existing relationship as the primary factor in their choice of lender.

Additional analyses from the 2018 Small Business Credit Survey will be released throughout 2019 at Future releases will take an in-depth look into specific types of small businesses, including nonemployer firms, minority-owned firms, and firms operating in low- and moderate-income communities.

Small Employer Firms in the Cleveland Fed's Region2

Firms in the Fourth District are more likely than firms nationally to be well-established businesses. They are less likely to be startup firms with fewer than five years in business, and less likely to have fewer than five employees. That said, the experiences of Fourth District firms are very similar, overall, to firms nationwide. The survey finds a few notable differences.

  • Fourth District firms are more likely than firms nationally to report they plan to add employees in the next 12 months (47% versus 44%, respectively). Fourth District firms' expectations for revenue growth are in line with national averages.
  • Compared to firms nationwide, Fourth District firms that sought financing were more likely to choose their funding source based on an existing relationship with the lender. Furthermore, Fourth District applicants were approved for a larger share of the funding sought than applicants in the national sample.
  • Among nonapplicants – firms that did not apply for new financing in the prior 12 months – Fourth District firms are more likely than firms nationally to use a line of credit on a regular basis.


  • Ohio firms were more likely than firms nationally to report their input costs had risen in the prior 12 months, though most indicated cost increases were relatively small (less than 4%); 65% of Ohio firms experienced a small increase in costs, compared to 48% of all firms.
  • Among both credit applicants and nonapplicants, firms in Ohio are less likely than firms nationwide to regularly use merchant cash advances or factoring.
  • Ohio nonapplicant firms were more likely to use external financing (87%), compared to nonapplicants nationally (71%). Of nonapplicants that use external financing, Ohio firms were significantly more likely than the national average to use lines of credit (62% versus 40%, respectively).


  • While Pennsylvania firms were as likely as firms nationwide to have experienced financial challenges in the prior 12 months, Pennsylvania respondents were more likely to report challenges with purchasing inventory or supplies to fulfill contracts (22%, compared to 17% nationally).
  • The share of Pennsylvania firms that applied for financing in the prior 12 months was similar to the national share; however, firms in Pennsylvania were far more likely to seek a line of credit (56% versus 41% nationally).
  • Considering the experiences of nonapplicants, Pennsylvania firms were more likely to use external financing than firms nationally (79% and 71%, respectively). In addition, use of lines of credit was far more common among nonapplicants in Pennsylvania than nationwide (64% versus 40%). Finally, nonapplicants in Pennsylvania that regularly use financing were more likely to report that their relationship with the lender was a primary factor in their lender choice (79% versus 60% nationally).

About the Small Business Credit Survey (SBCS)

The SBCS collects information about business performance, financing needs and choices, and borrowing experiences of firms with fewer than 500 employees. Responses to the SBCS provide insight into the dynamics behind aggregate lending trends and about noteworthy segments of small businesses. The results are weighted to reflect the full population of small businesses in the United States. The SBCS is not a random sample; therefore, results should be analyzed with awareness of potential methodological biases.

The SBCS includes experiences from firms across all 50 states and the District of Columbia through the joint efforts of the Federal Reserve Banks of New York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, Philadelphia, Richmond, San Francisco and St. Louis. The 2018 SBCS collected 12,455 responses in total, 6,614 of which were from employer firms.


  1. The survey questionnaire asks about a range of nonbank online providers, including retail/payments processors, peer-to-peer lenders, merchant cash advance lenders, and direct lenders. For purposes of topline findings, nonbank online lenders are grouped into one category, "online lenders." Return
  2. The Cleveland Fed's region (the Fourth District) includes Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia. Note that the bullets in this section include statewide data from Ohio, Pennsylvania, Kentucky, and West Virginia. Return

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell,, 513.218.1892