Small businesses in the Northeast are struggling with rising costs and credit needs, according to a study by the Federal Reserve Bank of New York released Tuesday.
The semiannual Small Business Credit Survey, which covers New Jersey, New York, Pennsylvania and Connecticut, found that two out of three businesses with fewer than 500 workers experienced increased business costs in 2013, with 25 percent saying it was their biggest challenge to growing.
The survey found that 40 percent of small businesses surveyed applied for credit in 2013, but 5 percent reported being priced out of credit by financing costs. Most applicants sought small loans, the Federal Reserve Bank said, with 90 percent asking for less than $1 million and 51 percent asking for less than $100,000.
“Survey results highlight rising business costs, including financing costs, and high credit application costs, which may explain why lending in lower dollar ranges — under $1 million — has stagnated,” the Federal Reserve Bank said in a prepared statement.
Nevertheless, credit was important to small firms, as 39 percent of applicants needed the credit for day-to-day operations, versus 30 percent seeking it to expand or invest. The survey found that 58 percent of applicants received at least some of the credit they applied for.
Many businesses are at least considering applying for credit in 2014, with 37 percent planning to apply and 17 percent still in the process of deciding.
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