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The Financing Experiences of Nonemployer Firms: Evidence from the 2014 Joint Small Business Credit Survey

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Listed:
  • 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 non-employer 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 non-employers 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 non-employers will be denied if they apply. Non-employer 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 non-employers experience are at least partially explained by the differing attributes of the group. Non-employers 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 2015-03, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedacd:99386
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    References listed on IDEAS

    as
    1. Karen Mills & Brayden McCarthy, 2014. "The State of Small Business Lending: Credit Access during the Recovery and How Technology May Change the Game," Harvard Business School Working Papers 15-004, Harvard Business School.
    2. Thomas Dunn & Douglas Holtz-Eakin, 1996. "Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links," NBER Working Papers 5622, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    firm performance; new firms; start‐ups; financial institutions and services;
    All these keywords.

    JEL classification:

    • 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
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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