Nearly three in four small-business owners who took part in a U.S. Bank survey said their companies grew in the past year, and 90% were optimistic about the future of their business.

U.S. Bank, whose parent company, U.S. Bancorp., is headquartered in Minneapolis, recently released its annual Small Business Perspective report. The report was developed from a survey of 1,000 small-business owners whose companies had between two and 99 employees and annual revenue of $25 million or less. One thousand small-business employees were also surveyed.

“The survey showed tremendous optimism in terms of the small-business outlook,” said Sekou Kaalund, a U.S. Bank executive vice president and head of its branch and small-business banking segment. “Now, they still have concerns about hiring and retention of employees … but they do have a strong sense of optimism, even compared to the survey from last year.”

Specifically, the survey found that:

• Nine in 10 small-business owners rate their company as successful, compared with 86% in 2023. In addition, 94% of Black and 89% of Hispanic small-business owners said that they are optimistic about the future of their businesses.
• Seventy-three percent of owner respondents ranked competition from other businesses as their top concern. Younger owners — those 43 and under — were more concerned about competition from large businesses than owners who are older, 9% compared with 13%.
• Sixty-five percent of owners ranked inflation and increased cost of materials as a top stressor. Older owners — those over age 44 — were more concerned about higher costs than younger owners (71% versus 60%).
• Fifty-two percent of owner respondents said their businesses are understaffed, and 56% said labor shortages caused them to postpone growth initiatives.
• Eighty-five percent of small-business owners plan to offer pay raises and bonuses in 2025, and 83% plan to offer flexible work hours to accommodate employees’ work-life balance.
• Nearly three-fourths of owner respondents said they planned to increase employee benefits, and two-thirds said they have had to upgrade benefits to attract qualified workers. Small-business employees said their top priorities for accepting their current job were salary (65%), flexibility (61%) and benefits (52%).

High interest rates are keeping some small-business owners from borrowing money to pay for such things as expansions, equipment purchases and building improvements, said Amy Anderson-Vali, U.S. Bank’s branch banking market leader for Iowa.

U.S. Bancorp. recorded $229 billion in commercial real estate and  commercial and retail loans in the third quarter that ended Sept. 30, an earnings report shows. The amount lent was less than in 2023’s third quarter when the financial institution recorded $235 billion in commercial real estate, commercial and retail loans.

“Small businesses are very similar to consumers,” Anderson-Vali said. “As interest rates go up, small businesses tend to try to focus on using their own money instead of funding through lending.  As interest rates go up, there is a little bit of a slowdown in lending.

“When interest rates start to go down, we’ll see an increase in lending activities,” she said.
Kaalund described the economy as strong.

“We haven’t seen credit quality deterioration for small businesses,” Kaalund said. “Instead, I’ve been impressed by the new business formation that is occurring.”

In 2023, 5.5 million new business applications were filed, up from just over 5 million in 2022, according to the U.S. Census Bureau. In Iowa, there were 33,444 applications for new businesses in 2023, an 11.6% increase from the 29,961 applications filed in 2022.

To view U.S. Bank’s 2024 Small Business Perspective report, click here.

Coming later this week: A look at U.S. Bank’s growth plans in Iowa.