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How Optimistic Are Small Business Owners About the Economy And Their Companies Futures

It has been about 5 years since the Great Recession ended but many people remain pessimistic about the economy. How optimistic are business owners?

It has been about five years since the Great Recession ended and the economic recovery began. Given the sluggish nature of the recovery, however, many people remain pessimistic about the economy. In fact, surprisingly high percentages of people surveyed believe that we are still in a recession.
But what about small business owners? What is their level of optimism with regard to the economy and their companies’ futures? Each month, the National Federation of Independent Business (NFIB) Research Foundation collects Small Business Economic Trends data to calculate a Small Business Optimism Index. The most recent index for September stood at 95.3, which was down slightly from the prior month and is five points lower than the pre-recession average from 1973-2007.


Encouraging Signs

While the overall Small Business Optimism Index fell, four individual components of the index improved. These included such critical components as “plans to increase inventory,” “expect the economy to improve,” and “now is a good time to expand.” And the index is up drastically since the depths of the recession in 2009, when it was hovering around 80.

These findings are in line with what Cadence Bank Business Banking Executive John Acosta is seeing in the small business marketplace. “In my experience, small business owners are going from extremely pessimistic to cautiously optimistic,” says Acosta. “And with the midterm elections now behind us, I think small business owners will become more optimistic because a huge uncertainty has been removed — and business owners hate uncertainty.”
One of the more interesting survey results is the relatively high percentage of owners who believe now is a good time to expand their business. This percentage is at its highest level since late 2007, during the peak of the last expansion. Among the businesses that are making capital expenditures, 38 percent reported spending on new equipment, 23 percent on acquiring vehicles, and 12 percent on improving or expanding facilities.
This also falls in line with Acosta’s observations. “Until recently, most businesses that borrowed money weren’t using it for growth or expansion, but rather for replacement or they were refinancing,” he says. “But now, we’re making more construction loans and loans to buy new equipment and acquire more inventory. These are signs that more businesses are now moving into growth and expansion mode.”



But Are Banks Lending?

Unfortunately, one of the biggest hindrances to this growth and expansion might be a perception among small business owners that banks don’t want to lend them money. “I’m always taken aback when a small business owner asks me if we’re lending,” says Acosta. “The answer is yes, we are definitely looking for well-run businesses with solid fundamentals to lend to. In today’s environment, banks want to grow their balance sheets, and lending to small businesses is a great way to do this.”
Another misperception Acosta sees among many small business owners is the belief that they need at least three years of strong financial performance to qualify for a loan. “We understand that many small businesses struggled in the early years of the recovery, and we take this into consideration,” he says. “Our underwriting process looks at trends — we’re more interested in what direction you are headed now than what happened a few years ago.”
Cadence Bank offers a full array of small business loans. These include business term loans for equipment and vehicle purchases, capital improvements, and expanding or buying a new facility, as well as business lines of credit to meet short-term working capital needs, buy seasonal inventory or meet unexpected business expenses.
Please contact your Cadence Business Banker if you would like to discuss how a business term loan or line of creditcan help you achieve your business growth and expansion goals.



This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.



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