Growth Strategies

Small Biz Owners Feeling a Squeeze

Optimism about the business environment falls among owners of smaller firms, and less than half now say credit is easy to obtain.
Stephen TaubSeptember 6, 2007

Small business owners were less upbeat in July than they were at the beginning of the prior quarter, according to the latest quarterly Wells Fargo/Gallup Small Business Index.

The index, the sum of both current and future perceptions, is based on telephone interviews with 603 small business owners nationwide and tracks six key measures for both current and future expectations: financial situation, cash flow, revenues, capital allocation, job hiring, and credit availability. The index dropped to 100 in July, down 13 points from April.

What’s more, small business owners’ current view of the operating environment and financial conditions slipped eight points to 41 in July from the prior quarterly reading in April. In addition, the percentage of small business owners saying obtaining credit was somewhat or very easy fell five points from 53 percent to 48 percent.

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Looking ahead, small business owners’ overall future expectations fell five points from April to 59, the lowest level since June 2005. For example, the percentage of small business owners expecting the number of jobs at their company to increase over the next 12 months fell seven points since April to 22 percent in July.

“Economic fundamentals remain solid but the chill of tighter credit is curbing small business owner optimism at a time when the vibrancy of consumer demand is in doubt,” said Dr. Scott Anderson, Wells Fargo senior economist. “Small businesses depend on strong consumer demand for their sales. Declining home prices, high consumer debt levels, and rising food and energy prices have reduced the consumers’ willingness and ability to spend in other areas.”

Although business owners are less optimistic than they were earlier in the year, 94 percent said they feel successful being small business owners. In addition, more than three-quarters said they would do it all over again if given the chance.

“Since the survey began, small business owner optimism has maintained steady growth and rose to its highest point on record for the Index two quarters ago,” said Rebecca Macieira-Kaufmann, executive vice president and head of Wells Fargo’s Small Business Segment.