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Small Businesses: Difference between revisions
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* Falling inflation, but sticky wage growth (labor market continues to be tight) could squeeze even more their profits | * Falling inflation, but sticky wage growth (labor market continues to be tight) could squeeze even more their profits | ||
* Majority of their financing comes from regional banks | * Majority of their financing comes from regional banks | ||
* Their current decrease in investments if prolongue could be detrimental for their competitiveness and growth long term. Especially as larger firms report better funding conditions than smaller ones. | |||
* Fiscal support has now rolled off completely | * Fiscal support has now rolled off completely | ||
* Higher rates could make it impossible to refinance their debt or take new one | * Higher rates could make it impossible to refinance their debt or take new one for investments or expenses. | ||
* Past cycle indicating small businesses have a slower recovery and bigger hit on employment in a recession. | * Past cycle indicating small businesses have a slower recovery and bigger hit on employment in a recession. | ||
'''Key Insights''' | '''Key Insights''' | ||
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* '''32 percent of small firms''' reported that since the start of 2023, '''financing conditions have constrained their firm's investment or spending plans''', compared to only 19 percent of large firms. | * '''32 percent of small firms''' reported that since the start of 2023, '''financing conditions have constrained their firm's investment or spending plans''', compared to only 19 percent of large firms. | ||
* '''40 percent of small firms''' '''have already or expect to change their investment or spending plans in light of tighter financing''' compared to only 26 percent of large firms. When asked why access to or the cost of financing was not constraining their investment plans, l'''arge firms were much more likely than small firms to reply that they faced favorable financing''', while also being less likely to say that they don't finance spending with debt. | * '''40 percent of small firms''' '''have already or expect to change their investment or spending plans in light of tighter financing''' compared to only 26 percent of large firms. When asked why access to or the cost of financing was not constraining their investment plans, l'''arge firms were much more likely than small firms to reply that they faced favorable financing''', while also being less likely to say that they don't finance spending with debt. | ||
* Small and large firms reported that if access to or the cost of financing constrained spending, it would primarily hinder the pursuit of new business opportunities. Small firms were more likely than large firms to report an impact on their ability to refinance or pay down debt and, to a lesser extent, repair or replace existing capital assets. | * Small and large firms reported that if access to or the cost of financing constrained spending, it would primarily hinder the pursuit of new business opportunities. '''Small firms were more likely than large firms to report an impact on their ability to refinance or pay down debt and, to a lesser extent, repair or replace existing capital assets.''' | ||
* Since small firms are more likely to be constrained in their ability to finance new business opportunities, perhaps it is not surprising that their '''expectations for revenue growth in 2023 were also below those of large firms''' (median of 4 percent versus 5 percent). | * Since small firms are more likely to be constrained in their ability to finance new business opportunities, perhaps it is not surprising that their '''expectations for revenue growth in 2023 were also below those of large firms''' (median of 4 percent versus 5 percent). | ||
* On average, compared to large firms, '''small firms report being more affected by tight financing conditions, are less optimistic about the economy and their own prospects, and expect lower revenue growth in 2023.''' | * On average, compared to large firms, '''small firms report being more affected by tight financing conditions, are less optimistic about the economy and their own prospects, and expect lower revenue growth in 2023.''' | ||