Union Bank has announced the results of its annual Small Business Economic Survey, which showed that small business owners overall have the brightest economic outlook in four years.
In 2014, nearly a third of entrepreneurs hired staff and significantly fewer reported layoffs.
Union Bank has announced the results of its annual Small Business Economic Survey, which showed that small business owners overall have the brightest economic outlook in four years.
In 2014, nearly a third of entrepreneurs hired staff and significantly fewer reported layoffs.
For the first time since 2012, the majority of small business owners overall believe the economy is heading in the right direction, with an all-time high of 90 percent believing their businesses are headed in the right direction. The rise in optimism reflects data showing that more entrepreneurs worked longer hours in 2014 due to increased business (61 percent, up 6 points from 2013).
Despite the rosier economic outlook, hints of restraint remain in capital and labor budgets for 2015, with most Orange County owners planning to maintain the same capital spending and staffing levels as 2014. In addition, more Orange County owners (26 percent, up 15 points) and owners statewide (20 percent, up 8 points) plan to move their business out of state, primarily due to tax burdens.
"The survey results reflect what we're seeing among small business owners who are encouraged about the economy and gradually hired additional staff in 2014," said Union Bank Managing Director Todd Hollander, head of Business Banking. "Taxes remain a challenge for small business owners, especially in California, but as the economy continues to strengthen, labor and capital budgets will likely grow."
Increasingly, owners overall (45 percent, up 2 points) believe the business climate has improved in the past two years. However, significantly fewer Orange County owners than last year (40 percent, down 10 points) believe the climate has improved in the past two years.
Orange County owners did, however, reflect the overall sentiment about the improving economy, with more owners (58 percent, up 9 points) believing the national economy is headed in the right direction and slightly more owners than last year (58 percent, up 1 point) believing their state's economy is headed in the right direction.
Among the industries surveyed, 100 percent of owners from the personal services sector (auto repair, salons, dry cleaning, etc.) believe their business is headed in the right direction (up 10 points); more owners from this sector also expressed optimism about the direction of the national economy (70 percent, up 42 points). In terms of their state economy, more owners from the professional services industry (physicians, certified public accountants, attorneys, etc.) believe their state's economy is headed in the right direction (67 percent, up 5 points).
Retail store owners expressed the most pessimism about the economy — half believe the national economy is heading in the wrong direction and 53 percent believe their state economy is headed in the wrong direction.
In Orange County, more entrepreneurs (18 percent, up 4 points) applied for a loan or access to credit in 2014 than in 2013. Of those who applied, 92 percent were approved.
In 2014, more minority business owners (25 percent) applied for a loan or access to credit compared with respondents overall (13 percent). Of those who applied, more minority business owners (81 percent) were approved compared with 76 percent overall. Among those denied for loans, significantly more owners overall (58 percent) were able to find alternative financing in 2014 (up 20 points) than the previous year.
“Helping small business owners obtain credit remains a priority for us, and it’s encouraging that alternative financing is a growing option overall and that more minority business owners were approved for loans in 2014,” said Kirsten (Didi) Hakes, head of SBA Lending at Union Bank. “Union Bank’s Business Diversity Lending and Community-Based Financing programs are two ways we’re helping to provide loan opportunities to women, minority and veteran-owned businesses, and we continue to see interest in these programs from business owners.”
Union Bank, recently ranked the country’s fifth largest SBA 504 lender in both units and volume, partners with community-based financing organizations with a goal of transitioning the companies into traditional business financing with Union Bank once their companies have grown, and many of the bank’s CBF partners also provide free or low-cost technical assistance programs (i.e. business planning, accounting, marketing, etc.) to assist with the continued goal of building credit worthiness of the client and investing back into the small business community.
While the majority of Orange County small business owners (60 percent) have not experienced changes in their ability to access credit in the past two years, most (62 percent) do not plan to apply for credit in 2015. This may be related to another part of the survey which found that most Orange County owners were either unprepared (16 percent) or unsure about whether they were ready (41 percent) for a changing interest rate environment.
Fewer Orange County owners reported layoffs in 2014 compared with the previous year (13 percent, down 9 points). In 2014, 28 percent of owners hired staff.
While most Orange County owners (70 percent) plan to maintain the same staffing levels, a higher percentage of respondents in Orange County (23 percent, up 4 points) than all other regions surveyed, plan to add staff in 2015. Seven percent of Orange County owners plan to decrease staff in 2015, up 7 percent from last year when there were no planned job cuts.
Surprisingly, retail store owners — the sector reporting the most pessimism about the economy — were more likely than owners from other industries to add staff in 2014 (32 percent), while owners from the personal services industry — the sector reporting the most optimism about the direction of their business and the national economy — were more likely to cut staff (22 percent) in 2014.
Fairly consistent with last year, most Orange County owners (60 percent) plan to keep the same capital spending levels. Slightly fewer owners (21 percent, down 1 point) plan to increase capital expenditures in 2015, while slightly more (19 percent, up 2 points) plan to decrease capital expenditures.
Among industries, significantly more owners in the personal services sector (36 percent) plan to increase capital expenditures, while significantly more in the retail sector (41 percent) plan to decrease capital spending.
