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Community Development Publication

Small Business Credit Survey: 2018 Report on Employer Firms in Texas

December 2018
Emily Ryder Perlmeter

Overview and Key Findings

Small businesses are critical to the U.S. economy, representing 99.9 percent of all businesses in the country.[1] Small employer firms (hereafter “firms”), upon which this report is based, are responsible for two out of three net job gains nationally.[2] Therefore, monitoring challenges and opportunities associated with revenue, financing and hiring for these groups is essential to understanding the U.S. economy.

In 2017, the Federal Reserve Bank of Dallas joined a Federal Reserve System effort to survey small businesses across the country on an annual basis. This report draws from the 2017 survey results, focusing on small employers in Texas. It further provides perspectives from community partners on addressing some of the challenges the survey reveals. Key findings include:

Majority of Texas firms were profitable and optimism is strong

  • The majority (59 percent) of Texas firms were profitable at the end of 2016, although rural firms were less likely to be profitable than those in urban areas.
  • Texas firms were optimistic—even more so than their national peers—about projected revenues for the next 12 months, with 76 percent expecting revenues to grow.

Most firms faced financial challenges

  • A majority (64 percent) of Texas firms experienced at least one financial challenge, with paying operating expenses being the most common.
  • Minority-owned firms struggled with credit availability much more often than their nonminority-owned counterparts (41 percent versus 25 percent).
  • Forty percent of Texas firms applied for financing in the prior 12 months,[3] with half of applicants receiving all funding requested. Minority-owned firms were twice as likely to receive no funding compared with nonminority firms.
  • Firms that were denied credit pointed to insufficient credit history and insufficient collateral as top reasons.

Hiring employees is a concern

  • Most Texas firms attempted to hire at least one employee in the prior 12 months, with two-thirds experiencing some level of difficulty doing so.
  • The largest difficulty was finding candidates with the right job-specific skills, training or education, followed closely by lack of applicants.
  • To address hiring issues, firms tended to increase starting pay for the positions or restructure existing staff to cover new responsibilities.

For information on resources available for entrepreneurs, see the Eleventh District Technical Assistance Resource Guide.

  1. “United States Small Business Profile,” Office of Advocacy, U.S. Small Business Administration, 2017.
  2. “Small Business Job Creation Deconstructed,” by Brian Headd, Office of Advocacy, U.S. Small Business Administration, September 2017.
  3. Approximately the second half of 2016 through the second half of 2017.
  • Pamela Foster
    Communications Partner, Federal Reserve Bank of Dallas

The information and views expressed in this report are the author’s and do not necessarily reflect official positions of the Federal Reserve Bank of Dallas or Federal Reserve System; nor do they constitute an endorsement of any organization or program.