Small Business Owner Pulse Survey

Executive Summary

Lendio surveyed more than 350 small-and medium-sized business owners across the U.S. to gather insights about their ability to start and run a small business. The survey included measures of business owners’ most significant challenges, access to capital, impacts on growth, and their ultimate goals for starting a small business. 

The analysis finds a clear correlation between small business owners’ age and sentiment. Those over 45 are more pessimistic, seeing starting a business as more challenging to attain in the current environment. In contrast, those under 45 find it slightly easier to achieve. 

Inflation, economic distress, and labor force were the biggest challenges small business owners cite. 

 When asked how respondents funded their small businesses, 54% indicated personal funds, followed by bank loans. This survey, along with demographic indicators, can help identify and illuminate the experiences of current and future business owners spanning the different regions of the U.S. Overwhelmingly, responses have consistently shown that access to funding can make or break a company. 

Although 49% of respondents believe it’s somewhat or much harder to achieve the dream of owning a small business today than in the past, online loan marketplaces are making it much easier. Lendio is committed to helping entrepreneurs find the best funding options for their small businesses, so they feel supported and optimistic about starting their small businesses.

Key Recommendations*

Based on survey results, we recommend the following to support small business owners: 

1. Loan Access – The rise of online lenders and lending marketplaces has increased access to small business loans, but there is still work to be done to improve small business’s access to funding through automation and faster approvals.
2. Target Underserved Areas –  Lenders should target underserved areas where respondents believe starting a business is less attainable. Those areas tend to also feel greater negative impacts caused by inflation, increasing costs, and economic strains.
3. Educational Resources – Empowering small business owners through education and resources within their communities can be a major benefit to getting businesses off the ground.

Small Businesses Owners Face Challenges But Remain Optimistic

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KEY STATS

• 49% of small business owners believe it’s somewhat or much harder to achieve the dream of owning a small business than in the past. 33% of SMB owners believe it is somewhat or much easier. 19% say it’s about the same.
• 89% of small business owners believe it’s possible to attain the goal of owning your own business.

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While 49% of small business owners believe it is somewhat or much harder to own a small business than it was in the past, 89% still believe it’s possible to reach that goal.

Entrepreneurs can face many challenges when starting a small business. There’s no one solution for all businesses. But making a plan, and accessing tools make it easier in today’s environment where small business owners are one-click-away from equipping themselves in advance. Some of the biggest obstacles to tackle for small business owners include the following:

1. Funding a business
2. Finding and keeping customers
3. Finding and keeping good employees

The Economy’s Effects On Small Businesses

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KEY STATS

• Small business owners are primarily facing challenges related to the economy (23%), inflation (21%) and other financial concerns (14%).
• Hiring remains a primary challenge for 11% of small business owners.
• 56% of small business state that large corporations have a negative impact on growth opportunities for their business.

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The economy is experiencing a slowdown, and the Federal Reserve continues to increase interest rates to tame inflation. Business owners are feeling the effects. In a recent World Economic Forum poll, nearly two-thirds of the economists believe there will be a 2023 recession. 

The post-pandemic environment has created many challenges, and small business owners still feel the ripple effects of COVID-19 protocols coupled with inflation. With inflation still at a 40-year high, we asked small business owners about their current biggest challenges. 

Small business owners are primarily facing challenges related to the economy, inflation and other financial concerns. Challenges related to Covid recovery and supply chain issues are less of an issue.

Creating An Environment Where Small Businesses Can Thrive

Location, taxes, and socioeconomic factors help to evaluate the best environment for a business which is why we asked respondents to select three choices that most affected their ability to start a business.

Access to capital and lower expenses are the key factors for creating an environment where entrepreneurs can start a business.

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KEY STATS

• 66% of small business owners state having a financial safety net would have had the most impact on their ability to start a business, followed by access to capital at 53%. 
• Of the respondents, 52% state that living in an area with lower business costs and a lower cost of living would be helpful. 44% state lower taxes would have an impact. 

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Funding Stats

Start-up funding for a small business can come from one or multiple resources. One of the most common ways entrepreneurs fund their businesses is through savings or friends and family. Alternatively, an infusion of cash from a small business loan may be the way to go. With no shortage of financing options, we asked survey participants how they first funded their businesses.   

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KEY STATS

• 54% of SMB owners started their business with personal funds with another 12% relying on friends and family. 
• 79% of SMB owners needed less than $100,000 to start their business with 43% needing less than $10,000.
• The average loan amount for a small business owner is $47,000.*
• A small business has a median of five employees when it is first funded by an outside lender.*
• A small business has been in business for about three years (a median of 40 months) when it is first funded by an outside lender.*

*Based on internal Lendio data of 300,000+ loans funded since 2013.

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How Small Business Owners Define The American Dream

The original definition of the “American Dream” was based on the prospect of equality, justice, and democracy. As times have changed, so has the idea behind the dream.

The definition for most small business owners is relatively fluid. While traditional components, such as homeownership (46%) and starting a business (34%), are still identified as important, 67% identify freedom to live how you want to be the primary component of the American Dream.   

Generational Differences

Millennials are a highly entrepreneurial group of business owners, with ages ranging from 27 to 42. In an environment with rising costs, layoffs, and the Great Resignation, we’ve seen a surge in startups. And according to Bloomberg, “creating successful companies is a young person’s game.” 

But being an entrepreneur is not just for the young at heart; it’s a dream for people of all ages, and where economic downturns have historically driven growth, the generations looking to start anew fund their businesses differently. 

At a certain age, owning a business can seem easy to give up on or unattainable. But entrepreneurship is a reality for both the young and old. The survey showed a distinct difference in sentiment between younger and older business owners, with older business owners feeling more pessimistic and younger business owners feeling more optimistic.

The survey also found generational differences in what helps or hinders a small business’s success and what those business owners value most in their life.

• While a large majority (71%) of SMB owners aged 18-44 believe large corporations have a negative impact on growth opportunities for their business, 57% of those 45 and above disagree, stating large corporations don’t have a negative impact on their business.

• While the generations agree that a financial safety net, access to capital and low costs are most critical to success, those 44 and younger place greater importance on access to educational resources and see cultural bias as a larger inhibitor. 

• Both generations agree that the freedom to live how you want is the most important component of the American dream. Perhaps unsurprisingly, those 45+ place greater importance on retirement (46%) while those under 45 place more importance on becoming wealthy (36%).

Gender Differences

The survey found relatively few differences between genders other than the amount of funding needed to first start the business.

• A significantly greater number of women (49%) needed less than $10,000 to start their business than men (36%).
• A significantly greater number of men (21%) needed $100K-$250K to start their business than women (12%).

Geographic Differences

There were few significant differences across regions. 

• The Middle Atlantic region (New York, New Jersey, Pennsylvania) had the most positive sentiment toward being able to start a business with 96% of respondents believing it’s possible.
• The East South Central region (Kentucky, Tennessee, Alabama, Mississippi) had the most negative sentiment, with 30% of respondents stating they didn’t believe it was possible to attain the goal of owning your own business.