Despite increased optimism, nearly one-fifth of
owners plan out-of-state move, primarily due to tax burdens; more
minority business owners applied and were approved for credit in
2014 compared with broader group
Union Bank today announced the results of its annual Small
Business Economic Survey, which showed that small business owners
have the brightest economic outlook in four years. In 2014, nearly
a third of entrepreneurs hired staff and significantly fewer
reported layoffs.
For the first time since 2012, the majority of small business
owners believe the overall economy is heading in the right
direction, with an all-time high of 90 percent believing their
business is headed in the right direction. The rise in optimism
reflects data showing that more entrepreneurs worked longer hours
in 2014 due to increased business (61 percent, up 6 points from
2013).
Despite the rosier economic outlook, hints of restraint remain
in capital and labor budgets for 2015, with most owners planning to
maintain the same capital spending and staffing levels as 2014. In
addition, a growing contingent (18 percent, up 7 points) plans to
move their business out of state, primarily due to tax burdens.
While most entrepreneurs plan to stay put, significantly more
owners from California (20 percent) plan to relocate compared with
owners from the Pacific Northwest (11 percent).
"The survey results reflect what we're seeing among small
business owners who are encouraged about the economy and gradually
hired additional staff in 2014," said Union Bank Managing Director
Todd Hollander, head of Business Banking. "Taxes remain a challenge
for small business owners, especially in California, but as the
economy continues to strengthen, labor and capital budgets will
likely grow."
Business Climate
Increasingly, owners (45 percent, up 2 points) believe the
business climate has improved in the past two years. This optimism
is reflected in the outlook for the economy, and for the first time
since 2012, most owners are optimistic about both the direction of
the national economy (60 percent, up 35 points from 2012) and the
direction of their state economy (59 percent, up 25 points from
2012).
Among the industries surveyed, 100 percent of owners from the
personal services sector (auto repair, salons, dry cleaning, etc.)
believe their business is headed in the right direction (up 10
points); more owners from this sector also expressed optimism about
the direction of the national economy (70 percent, up 42 points).
In terms of their state’s economy, more owners from the
professional services industry (physicians, certified public
accountants, attorneys, etc.) believe their state’s economy is
headed in the right direction (67 percent, up 5 points).
Retail store owners expressed the most pessimism about the
economy -- half believe the national economy is heading in the
wrong direction and 53 percent believe their state’s economy is
headed in the wrong direction.
Access to Credit
While the rate of business owners (13 percent) who applied for
loans or access to credit in 2014 dropped 6 points from 2013, loan
approval rates held fairly steady with slightly fewer owners (76
percent, down 2 points) receiving loan approvals in 2014.
In 2014, more minority business owners (25 percent) applied for
a loan or access to credit compared with respondents overall (13
percent). Of those who applied, more minority business owners (81
percent) were approved compared with 76 percent overall. Among
those denied for loans, significantly more owners overall (58
percent) were able to find alternative financing in 2014 (up 20
points) than the previous year.
“Helping small business owners obtain credit remains a priority
for us, and it’s encouraging that alternative financing is a
growing option overall and that more minority business owners were
approved for loans in 2014,” said Kirsten (Didi) Hakes, head of SBA
Lending at Union Bank. “Union Bank’s Business Diversity Lending and
Community-Based Financing programs are two ways we’re helping to
provide loan opportunities to women-, minority- and veteran-owned
businesses, and we continue to see interest in these programs from
business owners.”
Union Bank, recently ranked* the country’s fifth largest SBA 504
lender in both units and volume, partners with community-based
financing organizations with a goal of transitioning the companies
into traditional business financing with Union Bank once their
companies have grown, and many of the bank’s CBF partners also
provide free or low-cost technical assistance programs (i.e.
business planning, accounting, marketing, etc.) to assist with the
continued goal of building credit of the client and investing back
into the small business community.
While the majority of small business owners (59 percent) have
not experienced changes in their ability to access credit in the
past two years, most (69 percent) do not plan to apply for credit
in 2015. This may be related to another part of the survey which
found that most owners were either unprepared (16 percent) or
unsure about whether they were ready (37 percent) for a changing
interest rate environment.
Labor and Capital Costs
Significantly fewer owners (15 percent) reported layoffs in 2014
compared with the previous year (28 percent). In 2014, 30 percent
of owners reported new hires. Staff additions were driven by
revenue -- the new-hire rate among businesses with a revenue of $1
million or greater was twice as high (60 percent) as that for small
businesses overall.
This year, most owners (82 percent) plan to maintain the same
staffing levels, with slightly fewer owners planning to both add
staff (14 percent, down 1 point) and cut staff (5 percent, down 1
point). Among those expecting to add staff, more owners plan to
hire contractors, part-time help and temporary help than last
year.
Surprisingly, retail store owners — the sector reporting the
most pessimism about the economy — were more likely than owners
from other industries to add staff in 2014 (32 percent), while
owners from the personal services industry — the sector reporting
the most optimism about the direction of their business and the
national economy — were more likely to cut staff (22 percent) in
2014.
Fairly consistent with last year, most owners (60 percent, up 1
point) plan to keep the same capital spending levels. In 2015,
fewer owners (23 percent, down 3 points) plan to increase capital
expenditures and more owners (18 percent, up 2 points) plan to
decrease capital expenditures.
Among industries, significantly more owners in the personal
services sector (36 percent) plan to increase capital expenditures,
while significantly more in the retail sector (41 percent) plan to
decrease capital spending.
Government and Health Care
While fewer small business owners (23 percent, down 5 points)
rated government efforts to stimulate business as good or very
good, a third of owners believe that government actions taken since
the economic downturn have benefited their business (up 15 points
since 2012). Positive perceptions about government efforts were
higher among owners of certified women and women-, minority- and
veteran-owned businesses than non-certified businesses, with nearly
a third (30 percent) of certified businesses rating government
efforts as good or very good compared with 21 percent of
non-certified businesses.
As expected based on the 2014 survey, certified businesses (9
percent) were more than twice as likely to report employment growth
as a result of the Affordable Care Act compared with non-certified
businesses (4 percent). Health care changes had a smaller impact on
cost increases among business owners in 2014, with 48 percent
experiencing increased costs compared with 87 percent in 2013.
About the Survey
Union Bank, working with its survey partner, surveyed 631
respondents (531 in California and 100 in the Pacific Northwest)
online in January 2015. The small business respondents were
screened to ensure that they have been in operation for a minimum
of two years with owners over the age of 25. The small businesses
were defined for the survey as having $15 million or less in annual
sales. Based on the sample size, the survey results reflect a +/-
(3.9) point margin of error (95) percent of the time; California
results reflect a +/- (4.3) point margin of error (95) percent of
the time. Pacific Northwest results reflect a +/- (9.8) point
margin of error (95) percent of the time.
About MUFG Union Bank, N.A.
MUFG Union Bank, N.A., is a full-service bank with offices
across the United States. We provide a wide spectrum of corporate,
commercial, retail banking and wealth management solutions to meet
the needs of customers. The bank also offers an extensive portfolio
of value-added solutions for customers, including investment
banking, personal trust, capital markets, global treasury
management, transaction banking and other services. With assets of
$113.7 billion (USD), as of December 31, 2014, the bank has strong
capital reserves, credit ratings and capital ratios relative to
peer banks. MUFG Union Bank is a proud member of the Mitsubishi UFJ
Financial Group (NYSE: MTU), one of the world’s largest financial
organizations with total assets of approximately ¥279 trillion
(JPY) or $2.3 trillion (USD)1, as of December 31, 2014. MUFG
Americas Holdings Corporation, the financial holding company and
MUFG Union Bank, N.A. have corporate headquarters in New York
City.
1 Exchange rate of USD=¥119.78 (J-GAAP) as of December 31,
2014
*Source: U.S. Small Business Administration (10/1/2013 through
9/30/2014) based on approved loans.
Photos/Multimedia Gallery Available:
http://www.businesswire.com/multimedia/home/20150226005312/en/
MUFG Union Bank, N.A.Tanya Peebles-Hill,
+1-213-236-5329Tanya.PeeblesHill@unionbank.comorOrith Farago,
+1-714-582-2300Orith@OGF-PR.com@UnionBankNews
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