The Federal Reserve Bank of New York released its latest Small Business Borrowers Poll, offering data and insight into the credit experiences of more than 500 regional small businesses. Results suggest that discouraged firms and those that could secure only partial financing are challenges in the small business credit environment. While businesses continued to cite obstacles to obtaining credit, there are encouraging signs for future demand.

High Demand for Microloans but Limited Supply

Small businesses indicated that microloans—under $100,000—are highest in demand (58%) and are tougher to secure compared to larger loans. Risk factors that likely resulted in loan denials included less-established firms, weaker sales performance, and infrequent banking relationships. In general, firms were seeking these microloans to finance payroll, inventory and cash flow.

Discouraged Borrowers Were Not in the Credit Market

Almost half of the firms that did not apply for financing self-selected out of the applicant pool because they did not think they would be approved. Typically, these firms were small, had weaker sales, and primarily relied on savings and family for financing.

Partial Credit was a Common Outcome

Overall, 63 percent of businesses that applied for financing received credit—but not always for the full amount requested. Only 13 percent were approved for the full amount, while 36 percent received partial financing.

Future Demand

The poll also suggests that future demand for loans is likely to come from re-applicants (firms that applied for credit between mid-2011 and mid-2012), most of which didn’t receive the full amount of credit they requested. Additional demand is also likely to come from new applicants (that did not apply between mid-2011 and mid-2012), many of them previously self-categorized as discouraged. These "short-term" discouraged firms may encounter difficulty obtaining credit since few cited strong bank relationships and many had weaker sales than successful applicants.

More information including interactive graphics and three in-depth interviews with small business owners is available on the New York Fed’s website. The interviews provide unique firsthand accounts of the financing needs and economic challenges facing the businesses and include the perspectives of two start-ups.

The New York Fed’s Small Business Borrowers Poll collects information from small businesses in the Federal Reserve’s Second District—New York, northern New Jersey and Fairfield County, Connecticut—about their performance, credit experiences and employment needs. Responses for the latest poll were collected in Q2 2012 and include forward looking assessments for certain categories. Established in 2010, the poll represents the opinions of smaller firms (typically fewer than 10 employees and under $5 million in annual revenues) who choose to complete the questionnaire. Responses are collected through an online survey with distribution assistance from public and non-profit partners.

Read the full New York Federal Reserve Small Business Borrowers Poll.