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Small Businesses Report Success Securing Bank Loans, According to Private Capital Index

September 19, 2018, 08:29 AM
Filed Under: Economic Commentary

There is good news and bad news for small businesses in Q3: while they report a high degree of success securing bank loans in the prior three months, they are facing a growing problem attracting and retaining quality workers, according to the Q3 2018 Private Capital Access Index (PCA Index) from Pepperdine Graziadio Business School and Dun & Bradstreet.

Fifty-three percent of all small businesses surveyed report they were successful securing a bank loan in the past three months, including 85% of middle market companies ($5-100 million). Businesses with less than $5 million in revenue saw the sharpest increase, going from 32.7% reporting success in Q3 2017 to 43.8% in Q3 2018, a 33% increase.

“Small businesses, especially Main Street businesses, have turned a corner and banks have taken notice,” said Nalanda Matia, lead economist at Dun & Bradstreet. “Funding is flowing to smaller enterprises who are in growth mode.”

Among likely sources of future funding, small businesses reported bank loans were the no. 1 source named (67%), followed by credit union lending (41%) and asset-based lending (35%).

Overall, 75% of businesses expect their business to perform better in 2018 compared to 2017 and 84% are confident their business will grow.

However, small businesses are now facing a new challenge in attracting and retaining a quality workforce. Twenty-two percent of small and mid-sized businesses reported struggling with finding and retaining a skilled workforce, up from 17% in Q3 2017, a nearly 30% increase.

"In the U.S. there are more job openings than there are unemployed workers and small companies are not immune to skilled labor shortages,” said Dr. Craig R. Everett, director of the Pepperdine Private Capital Markets Project. "Small businesses will have to raise wages and hit untapped sources of labor if they are to continue to grow."

Seventeen percent of small businesses said the ability to find qualified employees was a key reason preventing them from hiring (second only to 35% reporting economic uncertainly or confidence). More than half of small businesses (54%) report they plan on hiring between 1 to 5 people in the next six months.

The PCA Index is a quarterly indicator produced by the Pepperdine Graziadio Business School and Dun & Bradstreet. The Q3 2018 Index report was derived from 657 completed responses collected between July 16 – July 31, 2018.


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