Small businesses in New York and several adjoining states are facing rising costs, limited credit availability and time-consuming credit applications, the Federal Reserve Bank of New York found.
The regional Federal Reserve Bank released its Small Business Credit Survey on Tuesday to highlight the financing needs, business choices and borrowing experiences of businesses with fewer than 500 employees in New York, New Jersey, Connecticut and Pennsylvania.
Two in three small firms out of 835 respondents experienced increasing costs of running their business, with a quarter indicating it was their biggest growth challenge in 2013. Two in five firms reported increasing financing costs, the semiannual survey found.
"A lot of businesses feel that the cost of business is going up because of the costs of health care, insurance and energy," said Rob Basso, president of Freeport-based Advantage Payroll Services.
About 59 percent of small businesses reported they had outstanding debt. Still, 40 percent of firms applied for lines of credit and business loans in 2013 -- not a significant change from 2012 -- to cover day-to-day operations or expand their business or make capital investments, according to the survey.
"The economy is just improving, so business owners are just looking for capital for hiring, expanding and improving infrastructure," Basso said. "It is vital for small businesses to have an easier access to capital because we are the ones that need it the most and we make up the majority of business on Long Island, not large employers."
Lending under $1 million has stagnated because applying for credit is tedious -- on average, firms spent 33 hours seeking credit and contacted three financial institutions, the report said.
"Applying for credit is time-consuming," said Phil Andrews, president of the Long Island African American Chamber of Commerce. "It is worth the effort to see where you stand and what changes you can make if you were denied."
About 58 percent of applicants received credit they applied for in 2013. More than half of unsuccessful applicants and non-applicants reported interest in exploring new financing types and contacting nontraditional lenders, the report said.
"More people are looking at nontraditional lenders, not banks, but a lot of business owners don't understand the resources that are available to do them," Basso said such as getting account receivable financing. "Alternate methods tend to be more expensive than traditional bank lending, which turns people off."