assessing risk|realizing opportunities

Small Business Optimism Rising

The National Federation of Independent Business (NFIB) has just released the Small Business Economic Trends Report for May 2010. The report published since 1973 measures small business sentiment on numerous economic and business factors that confront small businesses.

This months report indicates that small business optimism is improving. The NFIB index rose 3.8 points in April.  The rise boosted the optimism Index above the 90 level for the first time in 21 months.  The NFIB Index has never registered  such a protracted  reading of negative sentiment in the four decade history of the index.

During April nine of the ten index components rose, an indication  of  improving conditions of most business factors.  The single exception  was employment sentiment which continued to signal small businesses remain cautious on creating new jobs.  Historically, small businesses have been the major driver in job creation following recessions.  The poor job creation reading by the index  continues to be a  contra indicator of economic recovery. Small business owners are by nature and temperament optimistic and the report indicates that small businesses are still very cautious about allocation capital for jobs to meet improving business conditions.

Highlights of the Report:

  • Jobs:   Average employment per firm was negative 0.18 in April.  Average employment has fallen each month since July 2008.   Eleven percent of survey respondents reported unfilled job openings.   During the next quarter 7 percent plan layoffs and 14 percent plan to create new jobs.
  • Credit: The index reports that 31 percent of regular borrowers  report difficulties in arranging credit.  A net 14 percent reported difficulty in getting loans.  Overall, 91 percent of the owners reported all their credit needs met or they did not need to access credit.  Only 4 percent of the owners reported finance as their top business problem (down 1 point).  Pre-1983, as many as 37 percent cited financing and interest rates as their top problem.
  • Profits: Respondents reported profits improved by 12 points in April.  14 percent reported profits higher (up 5 points), and 51 percent reported profits falling (down 7 points).   Of the owners reporting higher earnings, 57 percent cited stronger sales as the primary cause and 7 percent each credited lower labor costs, material costs and higher selling prices.   For those reporting lower earnings compared to the previous three months, 57 percent cited weaker sales, 4 percent blamed rising labor costs, 6 percent higher materials costs, 2 percent higher insurance costs, and 6 percent blamed lower selling prices.
  • Prices: Fifteen percent of respondents reported raising average selling prices, but 24 percent reported average price reductions.  April is the 17th consecutive month in which more owners reported cutting average selling prices that raising them.

Components of the Optimism Index include: Labor Markets, Capital Spending, Inventory and Sales, Inflation, Profits and Wages, Credit Markets

The NFIB Report can be downloaded from the Sum2 website. NFIB Optimism Index

The NFIB Research Foundation has collected Small Business Economic Trends Data with Quarterly surveys since 1973 and monthly surveys since1986. The sample is drawn from the membership files of the NFIB.

Solutions from Sum2

Sum2 offers SME’s the Profit|Optimizer to  manage risk, devise recovery strategies and make better informed capital allocation decisions.

Risk: sme, small business, economic recovery

May 11, 2010 - Posted by | credit, Profit|Optimizer, small business, SME, Sum2 | , , , , , , , ,


  1. As a person starting a small business I would like to see the indicators for obtaining credit. If you are still in business after the economic turndown then perhaps credit is not an issue. If you are starting a small business like my Jazz Club in San Diego then it is an entirely different story. Banks have usually made start-ups go it on their own but in this market it may be a good idea to extend financing to those who will create the most jobs. That is normally a start ups.
    After being unemployed from my real estate career I have spent over 2 years developing my concept which would add 100 new jobs to San Diego. Through the Stimulus package EDD sent me to school to obtain my Professional Certificate in Green Building Construction and I have gotten all A’s in the SDSU course so to me this could be a great success story as I am signing a contract to purchase the building in Downtown San Diego next week.
    Trying to find the grants for that (we are a historic building Green LEED renovation project) is like finding a needle in a haystack. Is there any help for start-ups from the government and if so where do you find the info?

    Comment by Dawn N. Griffin | May 11, 2010 | Reply

  2. Hi Dawn,

    Congratulations on your recent certification and your acquisition of an historic building in San Diego. It seems that you are on track and you seem to be a pretty savvy business person. You are positioned in the marketplace to capitalize on a major trend, Green Construction. That is awesome and an important harbinger of success.

    Your observation about banks extending credit to start-ups is unfortunately spot on. Banks are risk averse to start-ups because they don’t have a track record and pose too much risk.

    Your probably better off exploring alternative funding options. If your going to own the building perhaps you can find a lender that does portfolio loans. If there is not enough equity to make that happen perhaps you could interest a private equity firm in your idea. Though PE also likes businesses run by managers with seasoned track records.

    As for learning what lenders are looking for to determine weather a borrower is creditworthy our product The Profit|Optimizer is a great tool to prepare to raise capital from investors or apply for a loan through banks.

    If your interested, send me an e-mail at and I will forward your address to a small business lender you may have some ideas on how to approach your funding needs.

    Thanks for your comments. I wish you great success in your new endeavor.


    Comment by riskrapper | May 11, 2010 | Reply

  3. Dear Dawn;

    Quite honestly grants are not my forte;however there are
    several other avenues you may be able to pursue.

    Call me @ 646-253-0956xt 156

    or email me @ above address.



    Comment by Francis L. Vena | May 11, 2010 | Reply

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