2/3/2011 7:59:21 AM By
Updated Post 2/3/2011
NFIB is out with an updated report on the state of small business credit as of the end of 2010. This is probably the most important annual report on small business credit that's produced in the United States right now because the Federal government doesn't have any meaningful ongoing monitoring of small business credit, a topic I have an editorial on in the forthcoming American Statistical Association magazine for February 2011. NFIB's current report is notable on many topics but I wanted to highlight a few that might be lost in their importance.
- Forty-eight percent of small businesses attempted to borrow funds in 2010 while 3 percent of small business reported attempting to raise equity capital.
Measuring attempts to get equity investments is very difficult and indeed we worked with NFIB on this question in their current survey. So, here, I think it's important to recognized the sheer magnitude of difference between those who seek debt rather than equity in a given year but also to realize that this 3 percent estimate is very imperfect. In my own opinion, equity investment questions are particularly open to differential reporting when asked in the very aggregate rather than by very specific categories/relationships.
- "Almost one-quarter (24%) of small employers currently use credit cards and no other bank credit source. The overwhelming majority of this group does not appear interested in obtaining more credit."
The U.S. seems to be uniquely placed among countries in the proportion of small businesses using mainly credit cards for financing. I am not surprised by this statistics but I thought their second conclusion that for a very specific group of business owners, credit cards are all that is needed and they are not seeking addition financing.
- The percentage of small employers applying for credit fell from 55 percent in 2009 to 48 percent in 2010. The percentage approved for credit rose somewhat, leaving about the same number accessing credit in 2010 as accessed it in 2009.
This is why these types of questions are important in a time series. Even though the same number of businesses appeared to get credit there was a large shift in those applying.
- If an application for a line or a loan is rejected, it pays small business owners to try at a second or third institution. While the success rate declines with each successive institution approached, approvals appear high enough at fall-back institutions to warrant the effort. Beyond attempts at three institutions, success appears rare. Cards are different. Ninety-five (95) percent of apply- cants got one on the first attempt or did not get one at all.
This last point was interesting I thought particularly for small business owners. I don't know of an other place that gathers information quite like this.
Original Post 6/10/2009
Today, Kauffman is hosting a conference in New York discussing "Financing the Entrepreneurial Recovery." Although I am not attending, I thought it would be helpful to highlight the topic of finance and survey questions and some example survey questions which are being used by the National Federation of Independent Businesses (NFIB) to track small business financial conditions. Let us start with an extract from June 2009 Small Business Economic Trends on the credit markets:
Overall, loan demand is down due to widespread postponement of investment in inventories and historically low plans for capital spending. Cash conservation is a top priority in uncertain times. In addition, the credit worthiness of many potential borrowers has deteriorated in the recession, leading to more difficult terms and higher loan rejection rates (even with no change in lending standards). Twenty-eight (28) percent reported all their borrowing needs met (down two points) compared to nine percent who reported problems obtaining desired financing (up one point; not seasonally adjusted). The net percent reporting all borrowing needs satisfied fell 3 points to 19 percent. The percent of owners reporting loans harder to get rose to 16 percent of all firms, the highest reading since the 1980-82 recession period. So, it appears that as the recession drags on, financing becomes more difficult to arrange. But only 5 percent of the owners reported “finance” as their #1 business problem, up a point from April, but statistically unchanged for years. The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted net negative 15 percent (more owners expect that it will be “harder” to arrange financing), 3 points worse than the April reading.
While the actual results here are very interesting and nuanced, let's turn to the questions used to gather this information. I am very thankful to Denny Dennis at NFIB who was nice enough to pull these questions for me for some research we are doing for an upcoming OECD-Kauffman workshop.
- 18. If you borrow money regularly (at least once every three months) as part of your business activity, how does the rate of interest payable on your most recent loan compare with that paid three months ago? 1. Much higher 2. Higher 3. Same 4. Much lower 5. Lower 7. Inapplicable, do not borrow regularly
- 18a. Are these loans easier or harder to get than they were three months ago? 1. Easier 2. Same 3. Harder 4. Don't know
- 18b. Do you expect to find it easier or harder to obtain your required financing during the next three months? 1. Easier 2. Same 3. Harder 4. Don't know
I like this set of questions but did want to point out that there are only a few small businesses which regularly enough borrow money to answer this question. I looked quickly at a similar question we asked of the Kauffman Firm Survey population (new businesses in 2004) and found only about 12 percent reported applying for new or renewed loans or lines of credit in calendar year 2007. I don't see in the report the percentage of all small businesses which actually applied in the last three months but have to imagine it is biased towards the bigger firms in the sample.
- 19. If you borrowed within the last three months for business purposes and the loan maturity was 1 year or less, what interest rate did you pay? __________ % or Prime + ___________
This question appears to show a real drop in interest rates paid relative to previous years which would seem to make sense. The wording to this question would seem to capture a larger share of firms.
- 20. During the last 3 months was your firm able to satisfy its borrowing needs? 1. Yes 2. No 3. Did not want to borrow
We asked a similar question in the Kauffman Firm Survey this year but worded differently, "During calendar year 2007, was there any time when [NAME BUSINESS] needed credit, but did not apply because you or others associated with [NAME BUSINESS] thought the application would be denied?" The two questions actually look at slightly different things, satisfaction of borrowing needs vs. needing credit but not applying. It'd be interesting to understand how firms interpretted both questions. On a quick read, NFIB's question seems a broader and worded in a way which I suspect respondent firms would respond better.
- 25. Compared to three months ago: c. Is trade credit, that supplier financing of purchases: 1. Easier to get 2. Harder to get 3. No change 4. Never use trade credit
I don't know much about trade credit but have heard this reported in Europe as a real issue of concern.
- 3. What is the single most important problem facing your business today? (Please circle only ONE of the following.) 4. Financing & interest rates
Intereestingly, this question peaked in mid-2008 and now remains quite low in comparison to other options (namely sales). Their response categories for this set of questions appears fairly complete and has shown some huge movements in the last year or two.
- 7. Were your net earnings or "income" (after taxes) from your business during the last calendar quarter higher, lower or about the same as they were for the quarter before?
- 7a. If higher or lower, what is the most important reason? (Circle only ONE.) 6. Financing costs
Wow. This is such a diverse array of questions with seemingly something for everyone. Unfortunately, NFIB doesn't go back to the same firms over time so we can only get these index type of questions. It'd be great for research purposes if they were able to do more of a longitudinal sample if only for a year.
6/12/2009 8:38:00 AM By
For those wanting to spend some real time getting to know data sets looking at nascent entrepreneurship.
Panel Study on Entrepreneurial Dynamics (PSED) 101
July 9-12, 2009
In your research, have you ever looked for
- a nationally representative source of nascent entrepreneurs?
- a nationally representative sample of people who are not organizing
- longitudinal measurements of entrepreneurial performance?
Then you want data from the Panel Study of Entrepreneurial Dynamics (PSED),
now with two datasets.
But before you try to use the PSED, do you know what this means?
SELECT IF (sysmis(cfphlag=1) or
(cfphlag < 90)).
If the answer is "no," then whether you are a faculty member or a doctoral student,
you need PSED 101 from the College of Charleston!
This four-day intensive workshop assumes that you have research questions about the
nature of entrepreneurship that you would like to answer using PSED I or PSED II.
It does not assume that you have (a) any degree of familiarity with the contents of
the datasets, or (b) knowledge of how to build syntax files that will answer the
research questions you have.
You'll learn how to write SPSS or STATA syntax files for creating variables, checking
data, correcting weights, performing analyses.
You'll also learn the overall data structure of the PSED, the differences between the
PSED I and PSED II, and the sorts of research problems for which each is most
Finally, under the individual guidance of the two instructors, you'll learn how to
construct the details of syntax files needed to answer your own research questions.
You'll leave with a CD containing the course materials, and with a personal copy
of the Handbook of Entrepreneurial Dynamics: The Process of Business Creation.
Amy E. Davis is Assistant Professor of Management and Entrepreneurship at the
College of Charleston. Her research examines gender, family, and social
networks in entrepreneurial and organizational contexts. Her dissertation
research was supported by a Kauffman Foundation Doctoral Fellowship. Amy's
PSED work is done in STATA.
Kelly G. Shaver is Professor and Chair of the Department of Management and
Entrepreneurship at the College of Charleston. He was in charge of the
Person Variables section of the PSED1, and served on the Advisory Committee for
PSED2. His specific research interest focuses on the psychological variables that
predict entrepreneurial persistence. Kelly's PSED work has been done using SPSS,
and his syntax file "kscleans" has been widely used to prepare the PSED1 dataset
for analysis of individual-level variables.
The PSED is described in detail in the Handbook of Entrepreneurial Dynamics: The
Process of Business Creation, edited by Gartner, Shaver, Carter, and Reynolds
(2004) and available from Sage Publications, ISBN 0-7619-2758-1.
Thanks to funding from the Kauffman Foundation, both PSED I and PSED II are
available at no charge from the Institute of Social Research at the University of
The workshop will be held in the Tate Center for Entrepreneurship at the College
of Charleston from July 9-12, 2008 (arrival should be on July 8).
For 2009, the PSED 101 registration fee is $200. Thanks to support from the
Kauffman Foundation, the first 10 registrants who need travel support will
each receive a $450 travel scholarship.
To register contact Kelly G. Shaver by email.
6/11/2009 8:29:00 AM By
For those aiming for publication in top-tier journals.
Fourth Annual Society for Entrepreneurship Scholars (SES)
Conference & Manuscript Boot-camp
October 8th -9th, 2009
Lead Sponsoring University: The Ohio State University, Fisher College of Business
Sponsoring University: Johns Hopkins University
Sponsoring Foundation: Kauffman Foundation
Call for Papers - deadline August 4th 2009
The Society of Entrepreneurship Scholars (SES) invites you to submit your best work- work you believe merits publication in a top tier journal - to the fourth Annual SES Conference and Manuscript Boot-camp. The sole purpose of this two-day conference is to increase the flow of manuscripts about entrepreneurship that are submitted to and published in top tier journals. Papers accepted for the conference will be reviewed in depth by at least two senior scholars. These scholars will then work with you during two four-hour working sessions, both individually and in small groups, on measures you can take to improve the manuscript and enhance its prospects for publication in a top tier journal.
The second day of the conference will be spent in plenary and working groups on topics that are fundamental to mission of the SES.
Some previous scholar mentors for the conference include, among others:
Some previous participants from different universities, among others:
- Howard Aldrich, Duke University
- Joe Mahoney, Harvard University
- Jay Barney, Purdue University
- Mike Hitt, Ohio State University
- Michael Lubatkin, University of Utah
Twenty-four (24) papers will be accepted for the conference. The sole criterion for acceptance is the paper's perceived potential for publication in top tier journals. Submitted papers must not be published or currently under review at a journal, but may be at any stage of development; i.e. working papers as well as papers that have already been reviewed and rejected by a journal. Papers may be conceptual or empirical. We encourage submissions from senior faculty who are interested in publishing about entrepreneurship, as well as from junior faculty and doctoral students.
Since the design of the conference restricts the number of participants, only one author (who should identify themselves as the submitting author) will be invited to participate in the conference. You may submit multiple co-authored papers to the conference, but each submitting author must be unique. If the submitting author is unable to attend the conference, the invitation will be withdrawn. Co-authors may not attend in the submitting author's place. All papers will be blind reviewed.
The 2009 Conference and Manuscript Boot-camp will be held on Thursday and Friday, October 8-9 at The Johns Hopkins University. The conference chair for the 2004 conference is Sharon Alvarez, Ohio State University. The conference co-chairs are David Deeds and Bill Schulze, case Western Reserve University. The event coordinator is Samuel Mathey.
Questions can be directed to Sharon Alvarez at firstname.lastname@example.org or Samuel Mathey at email@example.com
Submissions should be sent as an attachment to firstname.lastname@example.org no later than August 8th. The submitting author should be identified on the title page.
The mission of SES is to enhance the quality of scholarship in the field of entrepreneurship. Its operational goal is to increase the flow of manuscripts about entrepreneurship that are submitted to and published in the top tier journals. The society sponsors an annual conference and manuscript boot-camp, as well as other activities aimed at increasing scholarly discourse about entrepreneurship. Our metric for success is the number and quality of papers about entrepreneurial topics membership. The society is not affiliated with any journal, other scholarly organization, or academic institution.
Manuscript Submission: August 4, 2009
Acceptance Notification: August 22, 2009
Final Manuscript Due: September 22, 2009
Boot-camp date: October 8-9, 2009
Sample review guidelines for SES 2009 Paper evaluation:
The sole criteria for acceptance is the paper's potential for publication in a top tier journal. That is to say, papers should be evaluated on their promise and not the quality of the current manuscript. Problems with stated theory or flaws in methodology or data should be viewed as problems that can be solved, and not as a basis for rejection. Sample review guidelines are below:
- Does the paper address an interesting question?
- To what extent does it inform discussion of issues that are relevant across multiple social science disciplines?
- What is the paper's potential impact on the field of entrepreneurship?
- Can the conference add value to this paper?
- Are there fatal (or non correctable) flaws with the quality of the data, sample, and research design?
- Does the paper show editorial capability or promise?
- If you were serving as a senior scholar, how willing would you be to champion this paper?
6/10/2009 3:05:39 PM By
A couple of weeks ago I called for comment on the Bureau of Labor Statistics' proposed new entrepreneurship questions in their next round of questions for the National Youth Longitudinal Survey 1979. Since that time we have been engaged in a review ourselves and with Mathematica Policy Research, our survey vendor for the Kauffman Firm Survey. As the deadline for comments is quickly approaching, I will be sending this by the close of business Thursday. In the meantime, in the spirit of openness, I am posting a draft letter and attachments here. We remain open to other ideas from scholars or individuals with survey research experience on this population.
BLS.pdf (90.09 kb)
BLS attachment 1.pdf (106.66 kb)
BLS attachment 2.pdf (59.93 kb)
6/8/2009 1:44:00 AM By
I don't know much about this conference but thought the lens with which the organizers seem to be looking at innovation is an interesting one. We know from some of Ben Jones research, among others, that there is evidence of an age impact on innovation. Additionally, we know from a lot of entrepreneurship research that entrepreneurs often have a lot of accumulated work experience before striking out on their own.
- Population dynamics, innovation and productivity
Fondation du Risque Workshop
Friday, October, the 16th
Chair “Risques et Chances de la Transition Démographique” will hold a workshop at Palais
Brongniart, 28 Place de la Bourse, 75002 Paris, on 2009 October, the 16th.
Items adressed during the workshop will be the following:
- Aging and accumulation process of human capital
- Demographic transition and structure of investments
- Aging, consumption structures and innovation
- Demographic transition and firm renewal
6/3/2009 1:18:00 AM By
Wanted to highlight a conference we are helping to sponsor next week on the topic of patents and entrepreneurship at George Washington Law School.
6/2/2009 12:59:00 AM By
6/1/2009 1:20:00 PM By
From Interesting Bearing Notes
, an email newletter from the World Bank with a smattering of interesting updates and opportunities to disseminate information:
Former IBN editor Thorsten Beck and our own Asli Demirguc-Kunt have recently updated and expanded the Financial Development and Structure Database, which provides statistics on the size, activity, efficiency and stability of banks, nonbanks, equity markets, and bond markets across countries and through time. Newly added indicators include measures of banking structure and financial globalization. In their paper “Financial institutions and markets across countries and over time - data and analysis,” which introduces the revised data base, they also use the data to analyze financial system trends across the globe. Thorsten and Asli find that financial systems have deepened over the past decades along many dimensions. However, this is only true in high-income countries. Similarly, cross-border lending and bond issues have increased, but again only among high-income countries. Low and lower-middle income countries, on the other hand, have benefitted from higher remittance flows. Although the data ends in 2007, thus preventing the authors from fully capturing the recent global financial crisis, they clearly see the boom period leading up to the crisis reflected in the data. Banks’ net interest margins decreased, pushing banks to diversify income sources, while profitability increased. At the same time, the z-score, a measure of stability, decreased and hit a historic low in 2007.
More information at http://go.worldbank.org/DV96ZAS8R0
Developing better data is part of Kauffman's long-term strategy for advancing better research and policy on entrepreneurship and innovation. Data Maven is place you can connect with new data developments, provide us feedback on possible new projects, and contribute to the community seeking to improve entrepreneurship and innovation measurement.
E.J. Reedy is a manager in Research and Policy at the Kauffman Foundation. Learn more ...