The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index for March declined by 0.8 points to remain at a historically low reading of 90.1. Small businesses have been plagued by a myriad of difficulties over the past two years, including high inflation and a shortage of qualified labor. Now, turmoil in the banking system has added to their woes…
While small businesses reported diminishing loan accessibility prior to the collapse of Silicon Valley Bank and Signature Bank, these events have contributed to loan availability plunging to its lowest level in more than 10 years (see graph below). This is a major development as small businesses are far more dependent upon loans from banks than their Fortune 500 counterparts.
The deterioration of loan availability combined with high interest rates does not bode well for small businesses. The outlook for future sales continued to diminish, and the share of small businesses that believe it’s a good time to expand has sunk to one of the lowest levels on record. On a net basis, just two percent of owners believe it is a good time to be expanding operations – the worst reading since the depths of the Financial Crisis! Ongoing pessimism on the part of small business owners should remain a drag on the economy going forward.
Eli Petropoulos, CFA – Sr. Market Analyst