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Small business confidence is tanking again, especially in the case of banks and Biden

As President Biden begins to more forcefully construct a reelection case citing Bidenomics, Wall Street forecasts and actual GDP data are supportive, as are recent improving sentiment scores from consumers and CEOs. But on Main Street, small business owners remain a difficult group for Biden to win over.

Small business confidence is back at an all-time low, based on the just-released CNBC|SurveyMonkey Small Business Survey for the third quarter. That’s nothing latest for Biden, as small business confidence has hung around a low throughout his presidency. In fact, the most recent decline in the boldness index to a rating of 42 out of 100 matches the all-time low from exactly one yr ago.

With a business owner demographic that skews conservative, the dual economic problems with inflation and rising rates of interest have compounded the final concerns a couple of Democratic administration. But at a time when signs are pointing to progress within the fight against inflation and a possible though on no account certain end to Federal Reserve rate of interest hikes, the Q3 data presents more specific — and potentially more troubling — concerns for the president.

Even with a resilient economy, with rates of interest at a multi-decade high, the variety of small business owners who say they’ll easily access the capital needed to operate their firms continues to say no, now at under half (48%) versus 53% last quarter. This mustn’t come as a surprise, as higher rates of interest make banks stricter in the case of lending requirements, a dynamic that tends to disproportionately punish small businesses, and linger and even intensify the longer the next rate environment persists. Even for businesses that may secure loans, double-digit percentage rates are a money flow challenge.

Data released on Monday from small business trade group NFIB reported similar difficulty amongst business owners attempting to access capital, with over half (58%) who borrowed or tried to borrow reporting high rates of interest as their biggest criticism, and 40% of homeowners saying rates of interest were a big issue in the flexibility to access capital.

Wall Street banks and Main Street lending

The latest monthly report from alternative lending firm Biz2Credit from earlier this month shows small business loan approval percentages at banks with over $10 billion in assets at 13.3% in July, an approval rate that has been falling steadily and, pre-pandemic, had been as high as 28.3% in February 2020.

Rohit Arora, CEO of Biz2Credit, noted in a release on his firm’s data that as regulators raise capital requirements at some large banks within the years ahead, steps being taken today to organize include more hesitancy to lend to smaller corporations, since these loans can often range from five to seven years in term length.

Beyond recent concerns in regards to the stability of regional banks, rating agencies say that even the biggest Wall Street banks are on downgrade watch, not a situation through which banks are more likely to be more accommodating to the capital needs of small firms, and in actual fact, the CNBC|SurveyMonkey data recorded a pointy drop in economic system confidence amongst business owners who work with large banks.

When it involves accessing capital, small firms that hold accounts with large banks recorded the biggest drop quarter-over-quarter, a ten% decline, from 59% saying it was easy for them to access business capital all the way down to just 49% now. That was a much larger decline than amongst business owners who bank with a regional bank (down 2% quarter over quarter) and people who work with a community bank (down 4%). The largest group of small businesses (41%) conduct their business with large banks.

SurveyMonkey’s evaluation of the information pointed to a niche between business owners who express confidence and a insecurity in banks that has widened from just 1 percentage point in Q2 (49% confident, 50% not confident) to 9 points now (45% confident, 54% not confident) this quarter.

“These data are an excellent reminder that the final economy for small business owners can often be very different from the economy that customers on one side or large corporations on the opposite are experiencing,” said Laura Wronski, research science manager at SurveyMonkey.

The CNBC|SurveyMonkey Small Business Survey was conducted amongst over 2,000 small business owners across the U.S. between August 7-August 14.

While concerns across the economy in regards to the banking crisis have lessened for the reason that last quarter, that will not be reflected within the conditions that small businesses are facing.

“Banking concerns have change into much more top-of-mind for small business owners now, with their confidence within the U.S. banking system weakening and their ability to access needed capital hampered,” Wronski said.

Biden’s business supporters are increasingly negative

The CNBC|SurveyMonkey quarterly confidence index features a series of core sentiment indicators related to policy that contributed to the decline back to the all-time low, with more small business owners saying they expect immigration policy and tax policy to be a negative. 

That’s notable, based on SurveyMonkey evaluation of the outcomes, with these index components that had the biggest drag on the general scores not those tied to hiring or economic conditions, but “two aspects that fall squarely inside the remit of the president and Congress.”

Business owner expectations for revenue and hiring were largely unchanged, and the proportion that describe economic conditions as “good” modified only barely, from 40% to 38%. More describe conditions as “middling,” up from 43% to 46% this quarter. But only 15% describe business conditions as “bad.”

“Small business owners appear to be more heavily factoring the political environment into their confidence estimations than the economic environment. The economy has shown promising growth during the last quarter, with fewer concerns a couple of recession economy-wide now and fewer immediate threat from a banking crisis,” Wronski said.

In the boldness index scoring, relatively than broader survey questions, there was a notable drop for Biden. According to SurveyMonkey, overall approval of the president now matches the identical level as Q3 2022 survey, with 31% saying they approve and 68% saying they disapprove of the way in which Joe Biden is handling his job as president. The small business survey data matches the general trend within the recent FiveThirtyEight polling average.

But Wronski said, “What’s really surprising is that general confidence amongst small business owners is falling now for the primary time amongst Biden’s supporters.”

With the general confidence index back on the all-time low of 42, the gap in confidence index scoring specifically between Biden’s supporters and his detractors is now a record-low 18 points, based on SurveyMonkey (55 versus 37). Among survey respondents who discover as Democrats, the quarterly confidence rating declined from 58 to 52, the bottom it has been since Biden became president. Among independents, the decline was from 49 to 42, the bottom it has been amongst these respondents for the reason that first quarter of 2021. Republican confidence moved the least, declining from a rating of 39 to 37.

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