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The financing experiences of nonemployer firms: evidence from the 2014 joint small business credit survey

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  • Stephanie Rosoff
  • Ellie Terry

Abstract

Businesses without employees?or nonemployer firms?make up the majority of small businesses in the United States, but little is known about their financial lives, including their business financing needs and experiences. In this paper, we discuss findings from data on nonemployer firms in the 2014 Joint Small Business Credit Survey, a new annual survey by the Federal Reserve Banks of Atlanta, Cleveland, New York, and Philadelphia. Our results indicate that nonemployers use financing less than employers do. They hold less debt and apply for financing at lower rates, even when controlling for revenue size. The lower demand for credit appears to be a combination of a preference to avoid debt and a perception that nonemployers will be denied if they apply. Nonemployer applicants have more difficulty being approved and are likelier to seek financing from online lenders than are employer firms. We believe that the higher denial rates that nonemployers experience are at least partially explained by the differing attributes of the group. Nonemployers are younger, likelier to cite their poor credit score as a reason for denial, and less likely to be turning a profit than are employer firms.

Suggested Citation

  • Stephanie Rosoff & Ellie Terry, 2015. "The financing experiences of nonemployer firms: evidence from the 2014 joint small business credit survey," FRB Atlanta Community and Economic Development Discussion Paper 2015-3, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedacd:2015-03
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    File URL: https://www.frbatlanta.org/-/media/documents/community-development/publications/discussion-papers/2015/03-financing-experiences-nonemployment-firms-2015-07-23.pdf
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    References listed on IDEAS

    as
    1. Ryan Decker & John Haltiwanger & Ron Jarmin & Javier Miranda, 2014. "The Role of Entrepreneurship in US Job Creation and Economic Dynamism," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 3-24, Summer.
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    More about this item

    Keywords

    Firm performance; new firms; start-ups; financial institutions and services;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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