Union Bank’s Survey Finds Entrepreneurs Remain Cautious Amid Optimism
A Union Bank survey regarding the economic climate across the U.S. released Thursday shows that more businesses are planning to increase hiring and capital expenditures and that a slight uptick of optimism about the direction of the overall economy is shown to be most common among white-collar employees.
Though most small business owners plan to "play it safe" and control costs after a year of increased layoffs, some owners are planning to boost hiring and capital expenditures in 2013 thanks to optimism regarding the direction of the economy and their companies, according to Union Bank’s National Small Business Economic Survey.
“The overall volume of patrons visiting us at the branch has increased, as well as an overall enthusiasm and enquiring about loans,” said Oscar Dominguez Vice President and Manager of Union Bank Newhall and Stevenson Ranch Branches.
Union Bank has released the survey to provide feedback small business professionals.
“We like to share the data, Union bank takes pride in lending and being an active lender in small business we are seeing more and more ways to outreach to customers and business owners alike,” said Dominguez.
The survey included 200 participants statewide and 500 outside of California and found that while nearly half of those surveyed feel the climate for their small business has worsened in the past two years, a growing number believe the national and state economies are heading in the right direction and the majority (84 percent) maintain confidence in the direction of their own companies.
“This survey demonstrates the resilience and perseverance of small business owners across the nation who, in leading their companies through the ups and downs of the economy, remain steadfast in the vision for their companies,” said Union Bank Executive Vice President Todd Hollander, head of Business Banking.
While more California respondents show optimism about the direction of the national economy than those outside of California, more out-of-state businesses show confidence in the direction of their state economies. Thirty-seven percent of California respondents, compared with 29 percent of out-of-state respondents, show confidence in the direction of the national economy. Conversely, 43 percent of respondents outside of California agree with the direction of their state economy, compared with 37 percent of California respondents.
Among the industries surveyed, respondents in the professional services field (physicians, certified public accountants, attorneys, etc.) are most optimistic about the direction of the overall economy, with 37 percent believing the national economy is headed in the right direction and nearly half indicating confidence in the path of their state economy.
Respondents in the personal services industry (auto repair, salons, dry cleaning, etc.) are the most pessimistic about the national economy, with 71 percent believing it is headed in the wrong direction. Those in the personal services and the construction or engineering industries are most pessimistic about their state economies, with 70 percent of respondents in both industries believing their state economies are headed in the wrong direction.
In terms of spending, respondents are cautiously optimistic. A modest number plan to bolster staffing and capital spending this year, while most plan to maintain the status quo. Overall, 15 percent of businesses, up six percentage points from last year, plan to add staff, while 76 percent plan the same staffing levels. For capital expenditures, 23 percent, up three percentage points from last year, plan to increase spending, while 55 percent plan similar expenditures.
California businesses are more optimistic about hiring than those outside the state. Sixteen percent of California respondents, more than double than last year (7 percent), plan to add staff in 2013. Outside of California, 15 percent of respondents plan to add staff, up four percentage points from last year. Though more California respondents (25 percent) also plan to boost capital expenditures, up one percentage point from last year, out-of-state businesses experienced a bigger jump in the number of respondents planning increased capital spending, from 18 percent last year to 22 percent this year.
Among the industries surveyed, retail stores continue to lead significantly in capital spending plans, with 41 percent of respondents planning to increase capital expenditures, up 16 percentage points from last year. In terms of hiring, slightly more respondents in the personal and professional services fields (11 percent) plan to increase staff this year, with those in the personal services field incurring the biggest jump from only two percent last year.
Overall, 24 percent of respondents incurred layoffs in 2012, a three percentage point increase from the previous year. Eight percent of respondents expect to trim staff in 2013, a one percentage point increase from last year. California businesses fared better in terms of layoffs. Twenty-two percent of California businesses incurred layoffs in 2012, down three percentage points from the previous year, whereas 25 percent of businesses outside California incurred layoffs in 2012, up five percentage points from the previous year. More businesses outside of California (9 percent) plan to trim staff this year than those in California (6 percent). Businesses in the construction or engineering fields (37 percent) suffered nearly three times more employee cutbacks than respondents in all other industries surveyed.
Loans and Government Assistance
Overall, most respondents (40 percent) believe the first order of business for the Obama Administration in 2013 should be to create more small business tax incentives, followed by reducing regulatory hurdles for small business financing (29 percent) and expanding and simplifying the small business Affordable Care Act credit (15 percent).
Fourteen percent of respondents applied for a loan or access to credit in 2012, a four percentage point increase from the previous year. The majority (62 percent) of those who applied were approved. Of those approved, 27 percent received a government-assisted loan in 2012.
In California, significantly more respondents (17 percent) applied for a loan or access to credit in 2012 than the previous year (9 percent). Of those who applied, significantly more (64 percent) were approved than the previous year (47 percent). Similarly, more out-of-state businesses (14 percent) applied for a loan or access to credit in 2012 than the previous year (10 percent). Unlike California businesses, however, fewer out-of-state respondents were approved for a loan or access to credit in 2012 (62 percent) compared with the previous year (66 percent).
Overall, significantly more respondents (26 percent) than last year (18 percent) indicated that their business was positively impacted by actions taken by the government since the recent economic downturn and 17 percent (up 10 percentage points from last year) reported benefiting from the Small Business Jobs Act—legislation providing small banks with $30 billion to encourage lending to small businesses, $12 billion in tax incentives, and expanded Small Business Administration (SBA) loan programs. Of those helped by the Jobs Act, 53 percent said the biggest benefit was that it encouraged them to invest more in their business, followed by the provision of tax relief (34 percent) and greater access to capital or credit (33 percent). Slightly more California businesses (19 percent) reported benefiting from the Jobs Act than those outside the state (17 percent).
“These findings reflect what we are seeing firsthand as more small business owners apply for conventional or government loans to grow their business,” said Union Bank Senior Vice President Heather Endresen, government lending and specialty group manager for Business Banking. “Because our 150-year legacy of responsible banking has enabled us to have credit available to qualified candidates through all economic cycles, our business banking and government lending groups continue to grow to meet the needs of small businesses.” Union Bank is also participating in the SBA 7a loan program called Small Loan Advantage as part of a “Third Look” plan. “Third Look streamlines the loan process and helps us offer a variety of lending options for customers,” explains Endresen. “Those customers who may not qualify for a Union Bank loan will automatically be referred for the SBA Small Loan Advantage, and those who may not qualify for the Small Loan Advantage will automatically be referred to one of our community-based financing partners for a ‘third look.’”
Overall, 16 percent of respondents expect to make changes to the ownership structure of their business in 2013 and one in five respondents plan to make changes in the next five years. Of those planning changes in 2013, 37 percent plan to take on a partner, 21 percent plan to sell and 14 percent plan to transfer all or part of their business.
Of those planning changes in the next five years, 34 percent plan to sell, 30 percent plan to take on a partner and 13 percent plan to acquire a business. Significantly more respondents over 65 years of age (67 percent) plan to sell their business in the next five years than those under 65.
Other Survey Highlights: National, California and Non-California
• Nationally, respondents identified the same top disadvantages of operating a business in their state as the previous year: statewide economy (15 percent), national economy (14 percent) and state and/or local business taxes (11 percent).
o In California, the top three disadvantages identified were: statewide economy (17 percent), state and/or local business taxes (15 percent) and housing costs (11 percent).
o Outside of California, respondents identified the same top disadvantages of operating a business in their state as the previous year: national economy (17 percent), statewide economy (15 percent) and state and/or local business taxes (10 percent). Nationally, nearly one-fifth of those surveyed saw no competitive advantage to doing business in their state and respondents identified the same top three advantages as last year: cost of living (17 percent),
opportunities for growth (11 percent) and favorable climate (10 percent).
o In California, while a little more than one-fourth of respondents reported no advantage to
operating a business in their state, the top three advantages identified were: favorable climate (19 percent), opportunities for growth (13 percent) and cost of living (10 percent).
o Outside of California, while 18 percent of respondents reported no advantage to operating a
business in their state, respondents identified the same top three advantages as the previous year: cost of living (20 percent), opportunities for growth (11 percent) and family ties (9 percent).
Nationally, 51 percent of respondents said they worked more hours per week in 2012 than the same period the previous year. Of those who worked more hours, 44 percent attributed the added time to increased business and 30 percent to decreased staff.
o In California, 52 percent of respondents said they worked more hours per week in 2012 than the same period the previous year. Of those who worked more hours, 49 percent attributed the added time to increased business and 22 percent to decreased staff.
o Outside of California, 51 percent of respondents said they worked more hours per week in 2012 than the same period the previous year. Of those who worked more hours, 42 percent attributed the added time to increased business and 33 percent to decreased staff.
Nationally, 42 percent of those surveyed, a one percentage point increase from last year, said it was harder to access credit to grow their business over the past two years. Fourteen percent (up three percentage points from last year) said it was easier.
o In California, 43 percent of respondents, four percentage points fewer than last year, said it
was harder to access credit to grow their business over the past two years, and 16 percent of
respondents, six percentage points more than last year, said it was easier.
o Outside of California, 41 percent of respondents (up two percentage points from last year) said it was harder to access credit, and 13 percent of respondents, two percentage points more than last year, said it was easier.
About the Survey
Union Bank, working with its survey partner, Kenexa, surveyed 700 respondents (200 in California and 500 nationally) online in January 2013. The small businesses must have been in operation for a minimum of two years and were defined for the survey as having $15 million or less in annual sales. Based on the sample size, national survey results reflect a +/- 4 percent margin of error 95 percent of the time; California results reflect a +/- 7 percent margin of error 95 percent of the time.
About UnionBanCal Corporation & Union Bank, N.A.
Headquartered in San Francisco, UnionBanCal Corporation is a financial holding company with assets of $97 billion at December 31, 2012. Its primary subsidiary, Union Bank, N.A., is a full-service commercial bank providing an array of financial services to individuals, small businesses, middle-market companies, and major corporations. The bank operated 447 branches in California, Washington, Oregon, Texas, Illinois, and New York as well as two international offices, on December 31, 2012. UnionBanCal Corporation is a wholly-owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a subsidiary of Mitsubishi UFJ
Financial Group, Inc. Union Bank is a proud member of the Mitsubishi UFJ Financial Group (MUFG, NYSE:MTU), one of the world's largest financial organizations. Visit www.unionbank.com for more information.
About Kenexa, an IBM Company
To us, business is personal—and it’s about making the workforce smarter, which is why we’re proud to be the platform for a Smarter Workforce. We look at it from two angles—empowering people and transforming business. Our tools enable businesses to attract and keep the best people, develop their skills, cultivate new leaders and capitalize on their collective intelligence by applying human insights, social tools and workforce analytics to transform the way they work. Additional information about Kenexa and its global products and services can be accessed at www.kenexa.com.