Companies look to technological advances to improve their financial performance

This week, we learned that in June inflation stood at 9.1%, the highest in 40 years. Prices are rising, thanks to a variety of factors: an incredibly strong labor market, supply chain bottlenecks that led to shortages, soaring fuel prices, and pent-up demand for services – including travel (hotels, air fares, restaurants, attractions) and consumer goods that were unavailable during the pandemic.

Combine those factors with excess saving (imposed by pandemic rules that curtailed economic activity), the availability of stimulus money, and low interest rates, and you have a recipe for today’s high inflation.

“We must be focused on reducing inflation because, despite a lot of talk about recession lately, the evidence from the labor market indicates the economy is on track, while inflation continues to be far too high,” said Christopher J. Waller, a member of the Board of Governors of the Federal Reserve, at a speech in Idaho this week. “High inflation is the biggest challenge to sustaining our employment goal, and the greatest burden for individuals and families, especially lower- and moderate-income households that dedicate a larger share of their spending to necessities… The spending and pricing decisions people and businesses make every day depend on their expectations of future inflation, which in turn depend on whether they believe the Fed is sufficiently committed to its inflation target.”

Inflation continues to be a top problem for small businesses, according to the June 2022 NFIB Small Business Optimism Index. More than one-third (34%) of small business owners report that inflation is their single most important problem in operating their business, an increase of six points from May and the highest level since quarter four in 1980.

The NFIB Small Business Optimism Index dropped 3.6 points in June to 89.5, marking the sixth consecutive month below the 48-year average of 98. The percentage of small business owners expecting better business conditions over the next six months decreased seven points to a net negative 61%, the lowest level recorded in the 48-year survey.

Expectations for better conditions have worsened every month this year, according to this widely reported index. Key findings include:

· The net percent of owners who expect real sales to be higher decreased 13 points from May 2022 to a net negative 28%, a severe decline.

· Fifty percent of owners reported job openings that could not be filled, down one point from May, but historically very high.

· The net percent of owners raising average selling prices decreased three points to a net 69% seasonally adjusted, following May’s record high reading.

However, more than half (51%) of business owners reported capital outlays in the last six months. Of those making capital expenditures, 37% reported spending on new equipment, 23% acquired vehicles, and 14% improved or expanded facilities. Five percent acquired new buildings or land for expansion and 13% spent money for new fixtures and furniture. According to the NFIB Index, 23% of business owners plan capital outlays in the next few months, but this figure is down two points from May 2022.

For those looking to find small business financing for capital expenses, lenders are slowly, but surely, increasing their small business loan approval rates, according to the latest Biz2Credit Small Business Lending Index. Loan approval percentages at big banks ($10m+ in assets) inched upwards from 15.3% in May to 15.4% in June, while small banks’ approvals also rose from 20.9% in May to 21.1% in June.

Among non-bank lenders, approval percentages improved slightly, even as credit union lending approvals dipped:

  • Institutional lenders approved 25.6% of loan requests in June, up one-tenth of a percent from 25.5% of loan requests in May.
  • Alternative lenders’ approval rates rose from 26.9% in May to 27.1% in June.
  • Credit unions slipped slightly from 20.6% in May to 20.5% in June.

Loan approvals by banks have increased during every month of 2022, which is positive development for small businesses in search of capital. But, like seemingly everything else, interest rates have also climbed, so the cost of capital has increased. In fact, traders are betting the Federal Reserve could raise its target fed funds rate by 1 percentage point at its July 26-27 meeting, according to a report on CNBC.


On Thursday, July 14, the Dow slid more than 100 points on news of disappointing earnings by big banks, including JPMorgan Chase, which saw shares sink 3.5%. Earnings will be reported on Friday, July 15, by Wells Fargo, which dropped 0.8%, and Citigroup, which slipped 3% on July 14. Other financial firms were hit hard. Morgan Stanley dropped 0.4%, while Goldman Sachs, slipped 3% even before it reports quarterly earnings on Monday, July 18.

Looking ahead, the Bank of America 2022 Small Business Owner Report found that 70% of business owners plan to obtain funding in the year ahead. Fortunately, lenders have been showing willingness to grant funding requests in 2022. Borrowers are paying more than they had in interest rates, which were very low for a long time.

Bank of America found some positive news:

  • Entrepreneurs believe new technologies will be critical to business growth and risk reduction.
  • Business owners think that cybersecurity platforms (57%), 5G (50%) and automation (39%) will be important for business success in the next decade.
  • Business owners are also preparing to adapt their sales strategies to a digital-first world and, in the decade ahead, 44% plan to prioritize digital sales over brick and mortar.

Companies that keep pace with technology will continue to thrive. Similarly, in small business finance, lending institutions that had not digitized their processes are increasingly doing so. While many of the larger financial institutions have developed the capabilities on their own, a growing number of community and regional banks are partnering with platforms, such as Biz2X, that enable them to handle the loan application process via the web. This is a trend that will undoubtedly continue, and lenders that are unwilling or unable to change will fall behind their competitors. The majority of small business owners searching for capital today are starting and completing their applications online – often during off-business hours at night and during the weekends.

Meanwhile, the Bank of America study reports that 70% of business owners have adopted new digital tools and strategies for their business in the past 12 months, including more business banking online or via mobile apps (52%), and accepting more forms of cashless payments (43%).


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