Business Owners Delay Hiring and Avoid New Loans
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UPDATED: Apr 9, 2013
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Small and mid-sized businesses in the United States plan to delay hiring and acquiring new business loans amid a cautious economic upswing.
According to a PNC survey, three out of four small and mid-sized businesses expect their number of employees to remain stagnant for the next six months. Nearly one in three businesses will operate at a higher level, but with fewer employees.
In addition, only 41 percent of small to mid-sized business owners believe the government could positively impact their hiring plans with methods such as reducing business regulations.
Employment is not the only area that is predicted to remain the same. Business owners are not expecting to take on more loans than last year, despite economic growth. Last year only 15 percent of owners expected to take out a new business loan. This year, it only increased to 18 percent.
“Our findings found small business owners are uncertain about the next six months so they are holding back on seeking new loans,” PNC spokesman Patrick McMahon told loans.org. “They are being cautious — and nearly split on capital spending.”
Since an increase in business loans is not predicted, business owners are prepared to reduce costs through other methods. Forty-five percent of respondents said they will probably/definitely reduce capital spending in the next six months, compared to 54 percent who said they will not reduce it.
Despite being overly cautious, businesses predict they will experience positive growth.
During the next six months, 58 percent of respondents are optimistic and 41 percent are pessimistic, a turnaround from fall predictions of 42 percent optimism and 57 percent pessimism. Even with local economies, business owners are 71 percent optimistic, a growth from 59 percent last fall.
Stuart Hoffman, chief economist at PNC, said the report findings support bank forecasts that the moderate economic and job expansion will continue in 2013.
“The powerful engine of the U.S. economy is not firing on all cylinders, but there are sparks of optimism related to sales, profits and housing prices,” Hoffman said.