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One-Third of U.S. Small-Business Owners Feel Debt Burden

One-Third of U.S. Small-Business Owners Feel Debt Burden

by Dennis Jacobe

PRINCETON, NJ -- Thirty-six percent of U.S. small-business owners who have borrowed for their business in the past are very or somewhat uncomfortable with their company's debt, according to the April Wells Fargo/Gallup Small Business Index poll. Sixty-two percent of owners are very or somewhat comfortable with the debt their company is carrying.

Thinking now about the amount of business debt you have -- would you say you are ... ? April 2012 results

The survey was conducted April 2-6, 2012, with a random sample of 603 small-business owners. The same survey found a four-year high in small-business-owner optimism and a slight increase in optimism about future credit availability According to the poll, 76% of small-business owners have ever carried debt.

Owners More Likely to Be Reducing Company Debt Than Increasing It

Nearly one in three small businesses who have borrowed in the past have less debt now than they did 12 months ago, compared with 20% who say they have more debt. The remaining 47% have about the same amount of debt that they had a year ago.

Considering all the ways your business can carry debt, including credit cards, lines of credit, and other loans -- would would you say you have more debt now than you did 12 months ago, less debt, or about the same debt? April 2012 results

Half of Owners Say It Is Difficult to Pay Down Company Debt

Even as small-business owners seek to reduce their debt, 49% say it is extremely difficult (10%), very difficult (10%), or somewhat difficult (29%) to pay down their current business debt.

How difficult is it for you to pay down your current business debt? April 2012 results

One in Five Small Businesses Not Able to Get All the Credit They Need

Of the owners who have borrowed sometime in the past, 20% say they have been unable to get all the credit they needed over the past year. The vast majority say they did not need additional credit over the past year (38%) or that their business was able to obtain all the credit it needed (39%).

Have you been able to obtain all the credit you needed for your business in the last year or have you not needed credit in the past year? April 2012 results

Three in four owners whose small businesses have not been able to get all the credit they needed say their inability to borrow has negatively affected their business. Small-business owners use credit not only to make it easier to run their business, but also to do everything from staying open to expanding their products and services, taking on more risks, making payroll, and hiring new employees.


Four years after the recession and financial crisis, 36% of small-business owners who have borrowed in the past are still uncomfortable with their debt. Although one in three owners say their companies have less debt now than a year ago, many small businesses are finding it difficult to reduce their debt.

This may help explain why so many bankers argue that there is a lack of small-business loan demand on the part of many qualified borrowers, even when owner optimism is at its best level since July 2008. Over the past four years, many small-business owners have seen how having too much debt -- overleveraging -- has put companies out of business as the operating environment became difficult and lenders pulled back on their funding. Many owners don't want to expose their business' survival to the future funding decisions of bankers and regulators.

More worrisome, one in five small-business owners who have borrowed in the past cannot get all the credit they need. And, three in four of these say it is hurting their business. These are likely the owners who are voicing their concerns about a lack of credit availability for the nation's small businesses.

It is unclear whether weak business conditions and more stringent underwriting requirements have rightfully reduced the credit available to many of these small businesses, or whether some of today's underwriting standards remain too difficult -- reflecting the fallout of the financial crisis. Regardless, as long as one in five small businesses that have used credit are under such duress, it will be difficult for the U.S. economy to gain substantial positive economic momentum.

About the Wells-Fargo Small Business Index

Since August 2003, the Wells Fargo/Gallup Small Business Index has surveyed small-business owners on current and future perceptions of their business financial situation.

Survey Methods

Results for the total dataset are based on telephone interviews with 603 small-business owners, conducted April 2-6, 2012. For results based on the total sample of small-business owners, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.

For results based on the 464 small-business owners who have ever borrowed, one can say with 95% confidence that the maximum margin of sampling error is ±5 percentage points.

Sampling is done on an RDD basis using Dun & Bradstreet sampling of small businesses having $20 million or less of sales or revenues. The data is weighted to be representative of U.S. small businesses within this size range nationwide.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For more details on Gallup's polling methodology, visit

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