Small biz sales growth under pressure in Fed survey

More small business owners reported a decline in sales last year than an increase, the first time that’s been the case since 2021, according to an annual survey by the Federal Reserve. 

Business owners reported operational challenges including rising costs and wages, Fed analysts said Thursday in a report based on the Small Business Credit Survey. That research was carried out between September and early November of last year, before the presidential election.

For the majority of firms, profitability remained elusive. Roughly one in five reported that they broke even in the 12 months before the survey and 35% said they posted a loss. Still, owners remained broadly optimistic, with 58% saying they expected revenue to increase in the next 12 months.

The survey pre-dates the return of President Donald Trump to the White House, which has raised a new set of issues for U.S. entrepreneurs. An index of small-business optimism surged after Trump was elected, and many firms are enthused by his proposals to cut taxes and regulation, but there’s also mounting concern that his tariffs will raise prices and squeeze margins.   

The Fed study found that 19% of firms were growing — defined as increasing their revenues as well as employees, while planning to keep future staffing levels steady or raise them. That figure was down from 22% in the previous two years.

To respond to financial challenges, more than half of owners said they used personal funds and almost half raised prices. Almost one-quarter of respondents said they juggled bills and failed to make a payment on time, while more than one-third said they cut staff or hours, or downsized operations. Further, 58% of firms said they regularly use credit cards for financing and credit needs.

A growing share of firms said they’re finding that lenders have become stricter. Among companies that sought financing but were not approved, some 41% said they were denied credit because they have too much debt — almost double the share in the previous year’s survey. 

The Small Business Credit Survey is a collaboration between all 12 Federal Reserve banks, focused on conditions at firms with fewer than 500 workers. More than 7,600 small businesses responded to last year’s survey.