WASHINGTON — Small businesses are feeling better about the future, according to the latest MetLife & U.S. Chamber of Commerce Small Business Index, released in late June.
Both hiring plans and revenue expectations for the next year reached their highest level ever recorded in the Index (which dates back to 2017), driving the overall score higher.
The Index rose to 63.1 in the second quarter, a slight increase from the prior quarter (60.0) and near findings in Q4 2022 (62.1).
Overall, small businesses that were polled continue to feel good about their day-to-day business operations—including business health and cash flow—despite continued macroeconomic mixed signals.
However, most small-business owners continue to see inflation as their biggest challenge by far; more than half (54%) say it is their top challenge. This has remained consistent since Q3 2022 and has increased 35 percentage points since Q3 2021.
Nearly half (47%) of small businesses report that they anticipate increasing staff in the next year, up 10 percentage points since last quarter.
As for revenue expectations, 71% of small businesses say they expect next year’s revenue to increase, up by seven percentage points since Q1 2023.
Competition is also getting fiercer, with 36% of small businesses saying it has increased compared to six months ago, a nine-percentage point jump from the last quarter.
Small businesses say they are changing their behavior in response to interest rate hikes and have more concern about rising rates. Three in four (76%) say rising interest rates are limiting their ability to raise capital or financing for their business, up 10% since last quarter and up 16% since first asked one year ago.
In addition, half of small businesses report that they have delayed plans to grow their business in response to higher interest rates. Nearly three-quarters express concern about rising rates making it harder to pay back their current business loans. Seventy-three percent say it’s harder to borrow money from banks for their business because banks are tightening lines of credit.
Small-business owners also indicate that they are turning to more sources for capital/financing. A majority report relying on their personal savings (71%), credit cards (67%), and local banks or credit unions (59%) for funding. Four in 10 (41%) small businesses say they have turned to fixed-rate loans while 26% say they have used variable-rate loans.
The MetLife and U.S. Chamber of Commerce Small Business Index is an online survey of approximately 750 small-business owners and decision-makers. It’s designed to take the temperature of the sector, see where small-business owners are confident, and where they are experiencing challenges.
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].