Small businesses are not just small, but in fact a big deal to the U.S economy. They serve as a growth engine for the economy and create numerous jobs in the local communities of the nation. Such small businesses also support the development of public services and infrastructure by contributing in the local tax base. According to Dglobe, there are above 2,66,000 small businesses in Iowa that employ almost half the workforce of the state. But what is surprising is that even though optimism of small business owners is increasing, reports show that borrowing stalled in March.
Borrowing Stalls for Small Businesses
Recently, Reuters reported that business owners are becoming cautious about investing due to policy uncertainty, stalling the borrowing by small U.S. firms in March. The ‘Thomson Reuters/PayNet Small Business Lending Index’ is 134 for March, which is 1 percent down from last March. However, this index is up by 4 percent from February, which has 4 less working days. Also, the figures show that the U.S. economy has grown at 0.7 percent annual rate in Q1 (first quarter). This is the slowest in last three years, as CNBC reports.
Also, the borrowing by healthcare companies is down by 13 percent in March. The key barometer for growth is borrowing by small companies, as they have the potential to drive a major part of the economic gains.
However, there is still optimism among small business owners of America about the economy; according to a survey by Bank of America, reports News.com. This survey shows that the number of business owners that expect the U.S. economy to improve over next twelve months has climbed to 52 percent. A previous survey done from August to October showed just 31 percent. Additionally, the number of owners having growth expectations in local economy also jumped to a significant 50 percent from 37 percent.
Small Business Owners Getting Cautious
Small business owners are showing confidence and optimism; but as mentioned earlier they are cautious about investing and hiring new workers; until the Trump administration can deliver about promises such as less regulation and lower taxes, CNBC reports. The hiring plans of small business owners have lowered to 18 percent from 25 percent. The Chief Executive and Founder of PayNet, Bill Phelan says that small businesses seem to keep their powder dry.
This latest Bank of America survey was conducted in March and April. It also shows that only 9 percent of business owners plan to apply for loans during this year, which is down from 10 percent. Notably, such small companies are also considering other potential sources of money. Some of the frequently mentioned sources in the survey were online lenders, friends and family, investors, and even personal credit cards.
Noticeably, business owners are being equally cautious even while being optimistic about the U.S. economy.