Wall Street forecasts and actual GDP data, as well as recently improved sentiment scores from consumers and CEOs, are supportive as President Biden begins to build his re-election case more strongly by citing Bidenomics. But small business owners on Main Street remain a difficult group for Biden to win over.
Confidence in small businesses is back at an all-time low, according to the third quarter of the just-released CNBC|SurveyMonkey Small Business Survey. This is nothing new for Biden, as confidence in small businesses has been low during his presidency. In fact, the confidence index fell to 42 out of 100, an all-time low compared to exactly a year ago.
With a conservative business owner demographic, the twin economic challenges of inflation and rising interest rates have fueled general anxiety about a Democratic administration. But while signs point to progress in the fight against inflation and the potential, if by no means end, of Federal Reserve rate hikes, the third-quarter data presents more concrete — and potentially more worrisome — concerns for the president.
Even with a resilient economy and multi-decade high interest rates, the number of small business owners who say they can easily get the capital they need to run their firms continues to decline, to less than half now (48%) and 53% last quarter. This should come as no surprise, as higher interest rates make banks tighter when it comes to lending, a dynamic that disproportionately penalizes small businesses and is prolonged or even exacerbated as the higher interest rate environment continues. Even for businesses that can service loans, double-digit interest rates are a cash flow problem.
Data released Monday by the small business trade group NFIB indicated a similar challenge among business owners trying to access capital, with more than half (58%) of those borrowing or trying to borrow citing high interest rates as their biggest complaint, and 40% of owners stated the interest rate. rates were an important issue in access to capital.
Wall Street banks and Main Street loans
Alternative lending firm Biz2Credit’s most recent monthly report from earlier this month shows small business loan approval rates at banks with more than $10 billion in assets at 13.3% in July, a steady decline and similar to pre-pandemic approval rates. It was as high as 28.3% in February 2020.
Rohit Arora, CEO of Biz2Credit, said in a statement about his firm’s data that steps are being taken today to prepare as regulators raise capital requirements at some large banks in the coming years, making them more hesitant to lend to smaller companies because those loans are often it can be quick. the term is five to seven years.
In addition to recent concerns about the stability of regional banks, ratings agencies report that even the largest Wall Street banks are watching for a downgrade rather than a situation where banks can better accommodate the capital needs of smaller firms, and in fact, CNBC|SurveyMonkey data shows that working with large banks He noted that confidence in the financial system among business owners has decreased sharply.
When it comes to access to capital, small firms with accounts with major banks recorded the biggest decline over the quarter, a 10% drop, from 59% who said it is now easy to access business capital to 49%. That was a bigger drop than business owners banking with a regional bank (down 2% in the quarter) and those banking with a community bank (down 4%). The largest group of small businesses (41%) conducts their business with large banks.
SurveyMonkey’s analysis of the data found that the gap between business owners expressing confidence and distrust in banks has now grown to 9 points (45% confident), up from just 1 percentage point (49% confident, 50% unsure) in the second quarter. , 54% are not sure) this quarter.
“These data are a good reminder that the overall economy for small business owners can often be very different from the economy experienced by consumers on the one hand or large corporations on the other,” said Laura Wronski, research science manager at SurveyMonkey.
The CNBC|SurveyMonkey Small Business Poll was conducted between August 7 and August 14 among more than 2,000 small business owners in the United States.
While concerns about a banking crisis in the economy have eased since the last quarter, this has not been reflected in the conditions facing small businesses.
“Banking concerns are now even more of a focus for small business owners, as their confidence in the U.S. banking system weakens and their access to needed capital is hindered,” Wronski said.
Biden’s business supporters are increasingly negative
CNBC|SurveyMonkey’s quarterly confidence index included a number of key sentiment indicators on policy, with more small business owners expecting immigration policy and tax policy to be negative, dropping to all-time lows.
According to a SurveyMonkey analysis of the results, it’s notable that these index components had the biggest impact on overall scores, not employment or economic conditions, but “two factors directly related to the powers of the president and Congress.”
Business owner expectations for income and employment remained largely unchanged, and the percentage describing economic conditions as “good” changed only slightly, from 40% to 38%. In this quarter, 43% to 46% more describe the conditions as “average”. But only 15% describe business conditions as “bad”.
“Small business owners rate the political environment more heavily than the economic environment in their confidence ratings. The economy showed promising growth in the last quarter, now there is less concern about an economy-wide recession and less immediate danger than a banking crisis,” Vronsky said.
More than the broader survey questions, there was a noticeable decline for Biden in the trust index calculation. According to SurveyMonkey, the president’s overall approval rating is now on par with the Q3 2022 poll, with 31% approving and 68% disapproving of the way Joe Biden is handling his job as president. The small business survey data follows the general trend of the latest FiveThirtyEight survey.
But Wronski said, “What’s really surprising is that overall confidence among small business owners is falling among Biden supporters for the first time.”
While the overall trust index fell back to an all-time low of 42, the gap in the trust index, which specifically scores Biden’s supporters and opponents, is now a record low 18 points (55 vs. 37), according to SurveyMonkey. . Among poll respondents who identify as Democrats, the quarterly trust score fell from 58 to 52, the lowest since Biden took office. The decline among independents fell from 49 to 42, the lowest among these respondents since the first quarter of 2021. The confidence of the Republicans decreased from 39 to 37 and moved the least.