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SMB Outlook for 2018

  • Financing|
Published: 03/05/2018

If you run a small or medium business, you might sometimes feel so caught up in daily responsibilities that it can be hard to think about the future of the broader economic landscape. But conditions in that landscape affect everyone, including you. Let’s take a look at the small/medium business outlook for 2018.

Overall Optimism

The National Small Business Association’s 2017 year-end report painted a cheering portrait of small/medium business health in the U.S. 84% of respondents felt confident about their business’s future, while 30% anticipated growth opportunities in the next 6-12 months. 53% experienced revenue increases in 2017, 66% predicted increases in 2018, 58% increased their employees’ wages during 2017, and 63% plan on increasing wages this year. Small business owners are generally well-attuned to the market conditions around them, so their optimism is uplifting news for everyone.

The report also found a clear correlation between small businesses’ financing and hiring abilities — financing creates jobs! In addition, more and more owners can find financing; 73% reported being able to find adequate funding. But the report also pointed out that a substantial 27% of all small businesses fail to find financing. Part of this gap may be due to large banks’ reluctance to lend to small businesses: the report found that while financing opportunities have generally improved year-to-year, “the number of small firms relying in [sic] large-bank financing has hovered at just 15 percent for the last two years.” In addition, loans are getting tougher on small firms: 11% reported loan terms becoming less favorable to their business, while only 3% reported terms becoming more favorable.

Clearly, there is much more work to be done when it comes to providing appropriate small business financing. The SBA is taking measures to close the gap: Forbes reports that changes in loan equity requirements will likely make it easier for small businesses to obtain SBA loans.

If you’re a small business owner wondering if now is a good time to expand, take heart in the fact that many similar companies think it’s the perfect time to grow. Another year-end survey from the National Federation of Independent Business found that a record-high number of respondents, 32%, agreed that now is a good time to expand.

Changing Regulations

survey by Right Networks found that many small-to-medium businesses are closely monitoring tax and healthcare regulations that affect their companies. Nearly 40% of surveyed small/medium businesses and CPAs who work with them identified taxes as the biggest regulatory issue facing small firms, while 34% thought it was healthcare regulation. 37% predicted a positive effect from the new Tax Reform and Jobs Act, while only 23% anticipated negative ramifications. Mainstay business publisher Kiplingerreports that while the bill doesn’t aid small businesses as much as it aids larger corporations, a 20% reduction of taxable business income still provides a significant financial boost for small and medium businesses. Work is also underway to address healthcare burdens. A recently proposed rule from the Department of Labor would expand access to association health plans for small employers.

Taxes and healthcare will likely remain a contentious issue in the American public space, but it seems clear that many small/medium business owners are happy with the way things are going and hope to see current trends continue. The NSBA survey found that small business owners feel less concerned about regulatory burdens than they did a year ago. Instead, they hope that partisan gridlock can be reduced in order to focus on health care costs and the national deficit. And they may be getting more of a voice in how regulations are passed: the Small Business Regulatory Flexibility Improvements Act, which is currently before the Senate Committee on Small Business and Entrepreneurship, would require greater analysis of small business impacts for regulations going forward if passed in 2018. The recently established Office of the Advocate for Small Business Capital Formation could also complete its candidate hunt this year and find an Advocate to head the office, establishing a voice for small business inside the SEC.

Some concern about stock market

Of course, many year-end surveys for 2017 were released too early to address impacts from February 5th, when the Dow dropped 1,175 points in one day, the steepest decline in its history. It was a scary day for anyone who owned securities, but was it part of a worrying larger trend or simply a dramatic adjustment? Most observers aren’t quite sure yet. While of course the diminished value of these stocks represent real lost value for their owners, stock market drops do the most damage when they damage consumer and business confidence, causing a contraction of spending. PBS News Hour argues that there’s little evidence the drop did serious damage to the currently resilient US economy, and investors are unlikely to cut back their spending. Feedback from recent metrics, such as the Philadelphia Federal Reserve’s Manufacturing Business Outlook (which indexed 25.8 in February, an improvement over January’s 22.1), seem to support the argument that we’re not on the brink of catastrophe.

Final Thoughts

It’s a good time to be in the small business world, and we’re hoping that these positive trends will continue far beyond 2018. If you decide that now’s the time for smart business expansion, don’t forget to look at Currency’s low-friction platform for finding the best equipment loan for you among over 100 qualified lenders.

If you’re interested in further discussing how larger economic outlooks might affect your small business this year, feel free to contact an expert at Currency.

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