By Dell Gines
Family-owned small business

The circulatory system of the human body is fascinating. For example, did you know that the heart, veins, and arteries are responsible for transporting oxygen and nutrients through the entire body, while also regulating the body’s temperature and distributing necessary hormones? A healthy circulatory system goes a long way in helping maintain overall health.

Similarly, the overall health of a small business requires sound finances, which often includes access to small business credit.

Because of the importance of credit to small businesses, in 2016 the Federal Reserve System launched the annual Small Business Credit Survey (SBCS). The survey is designed to share key insights across various dimensions of small businesses’ access to credit. It provides high-quality data and information on owners’ experiences seeking credit. These data and insights, shared via a series of reports, help policymakers be better informed and small business support organizations develop programs better tailored to small firms’ needs.


Want to explore more data and findings from the Fed’s Small Business Credit Survey (SBCS) over the years? 

Check out fedsmallbusiness.org


The importance of small businesses

Small businesses are the backbone of the US economy. This is true. According to the US Small Business Administration (SBA), small businesses employ 47% of the nation’s private workforce.  The SBA further notes that 99% of all US businesses are small businesses, which it defines as firms of 500 or fewer employees. 

In almost every case, a big business got its start as a small business. This makes understanding the small business circulatory system, including small business access to credit, critical for policymakers and communities.   

The value of the SBCS

The Small Business Credit Survey provides a deeper understanding of the needs of small business owners across the nation. Here are three reasons why the survey is so important:

  • SBCS provides national, regional, state, and sometimes organizational insight into the small business credit ecosystem. Surprisingly, there are very few annual small business credit surveys despite the importance of small businesses. Most of the surveys in the marketplace collect limited information, or their cadence doesn’t allow policymakers and support organizations to make close-to-real-time decisions.
  • SBCS provides insight into various demographics and geographies. The data from the Fed’s survey provides insight into a range of groups and areas, including older small business owners, rural business owners, and many more.  
  • SBCS is a trusted source for policymakers and small business support organizations. Because of the national credibility of the Federal Reserve System, policymakers and support organizations can be confident they are getting comprehensive information and data from a trusted source.  

Examples of SBCS reports

From this trove of data collected through the SBCS, the Fed publishes a range of reports on small businesses’ experiences accessing credit. Back in 2017, I had the exciting opportunity to coauthor the Report on Women-Owned Firms. Also, I used data from that survey in a report I authored on Black women entrepreneurs, the fastest-growing group of entrepreneurs in the nation.

Other examples of reports that use SBCS data are the  

  • Report on Employer Firms. One of the flagship annual reports based upon survey data is the Report on Employer Firms. The 2021 report shared insight into the impact that the COVID-19 pandemic had on small business credit. Some interesting data points from this report include that 79% of firms surveyed had debt outstanding, increasing from 71% of firms in 2019. The total debt small businesses held also increased; the share of firms with more than $100,000 in debt rose from 31% in 2019 to 44% in 2020.
  • Report on Firms Owned by People of Color. In 2021, the Report on Firms Owned by People of Color was released. As many of you know, while challenging for many small businesses, the pandemic was particularly hard on small businesses owned by people of color. In the report, survey responses show that Asian, Black, and Hispanic firms reported losing 25% or more of sales during the early pandemic at a much higher rate than white business owners. 
  • Report on Rural Employer Firms. One unique demographic report using SBCS data was the Report on Rural Employer Firms, released in 2016. This report showed that rural small businesses were more likely to pursue funding from small banks than their urban peers. It also showed that rural small businesses were less likely to be growing than their urban counterparts.  

From numbers to people: the impact of small business credit access

While I have been talking about small business credit in broad terms, I would like to share two anecdotes on small business owners’ access to credit to enhance my points. Before moving into the community development world, I was a business banker for a large financial institution. As a business lender, I got to see the impact of access to small business credit every day.

In one instance, the owners of a small printing company had applied for a loan. They were operating out of their garage at the time. I remember advocating strongly for the deal even though it was a riskier deal. Finally, the applicants were approved after jumping through some necessary loan-underwriting hoops. This loan allowed them to move into a formal office space and become a certified diverse firm. Their firm has been a respected business in the Omaha community for over 10 years.

My second anecdote features the experience of Carmen Tapio*, owner of North End Teleservices. Ms. Tapio, a member of the Kansas City Fed’s Omaha Branch board, has shared that she encountered challenges to securing bank funding. After being denied by many banks and lenders, she was finally able to get a deal done through an alternative small business lender. This funding helped her scale up her business. Today, Ms. Tapio employs hundreds of workers. She is the largest Black employer in the state of Nebraska. And she is leading the way on a $40 million-dollar mixed-use development in a low-income community in Omaha.  

Access to cash is vital for small businesses

These are just two of many anecdotes I could share. I have also heard stories on the flip side: how lack of access stalled business growth, prevented entrepreneurs from starting businesses, and, in some cases, caused potentially viable firms to close their doors.

The point of these anecdotes is not to criticize banks or other small business lenders on their lending policies. Instead, my point is to showcase the need for effective small business credit to worthy borrowers. 

The circulatory system is essential to human health because of its role in transporting oxygen and nutrients. Banks, community lenders, and other funding sources play a similar role in providing access to cash and credit. This access is essential to a healthy business.

Recognizing the importance of small businesses to the US economy and small business credit to small businesses, the Fed launched the SBCS in 2016. This survey provides annual insight into how small businesses access and use small business credit.

I encourage you to check out the survey website www.fedsmallbusiness.org page to find various reports, usable data, and information on the survey itself.

*To learn more about Carmen Tapio’s story, visit the Federal Reserve System’s Racism and the Economy: Focus on Entrepreneurship session.

WATCH ON DEMAND: During a recent FedTalk with the Cleveland Fed, Emily Corcoran, Small Business Credit Survey program manager, talked about the 2022 SBCS report on employer firms. Watch on demand >

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