08/14/2019 | Press release | Distributed by Public on 08/14/2019 09:27
NEW YORK - The Federal Reserve Bank of New York today issued the 2019 Small Business Credit Survey Report on Nonemployer Firms, which examines the business conditions and the credit environment of small businesses with no employees other than the business's owners. The report is based on the Small Business Credit Survey that was fielded in 2018. Nonemployer firms can include gig workers, startups that are planning to hire employees, and mature businesses that rely on contract workers as their workforce, among others.
'Nonemployer firms - which represent 81% of all small businesses - are an increasingly important part of our economy, and today's report highlights how their performance has a real impact on American households,' said Claire Kramer Mills, assistant vice president at the New York Fed. 'A majority of these firms struggle with making a profit, facing both rising costs and limits in passing on those costs to consumers. The data also underscore financing challenges for non-White business owners, echoing similar findings for employer firms.'
This year's survey offers a deep dive into the characteristics, performance, prospects and challenges of nonemployer firms nationwide. Among the report's top findings, the data reveal that 55% of these firms were either unprofitable or broke even in 2017, with a majority also reporting rising costs. The report also finds racial disparities in reported access to funding and highlights financing challenges faced by firms looking to hire employees in the near future.
Nonemployer firms employ - either as a source of primary or supplemental income - 17% of the American workforce. The Fed's Small Business Credit Survey Report on Nonemployer Firms seeks to provide policymakers and the general public with a unique, data-driven snapshot of the nature of these firms, as well as the business and financing dynamics they face.
Key findings can be found in the Nonemployer Firms Report's executive summary. These findings include:
Profitability, Revenue and Cost Challenges:
Financial Well-Being and Funding
Diversity of Work Among Nonemployers
As part of its deep-dive into the nonemployer landscape nationwide, the report includes a detailed analysis of five different categories of firms based on the nature of their work. This includes the firm's role as a source of income for owners, hiring plans, years in operation, and whether it can be designated as contract work. Detailed definitions of these categories can be found in the Executive Summary section of the report.
Key findings among these various groups include:
About the Small Business Credit Survey (SBCS)
The SBCS collects information about business performance, financing needs and choices and borrowing experiences of firms with fewer than 500 employees. Responses to the SBCS provide insight into the dynamics behind aggregate lending trends and about noteworthy segments of small businesses. The results are weighted to reflect the full population of small businesses in the United States. The SBCS is not a random sample; therefore, results should be analyzed with awareness of potential methodological biases.
The SBCS includes experiences of firms from across all 50 states and the District of Columbia through the joint efforts of the Federal Reserve Banks of New York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, Philadelphia, Richmond, San Francisco and St. Louis. The 2018 SBCS collected 12,455 responses in total, 5,841 of which were from nonemployer firms.