Small business owners are collectively breathing a sigh of relief over the Federal Reserve's widely anticipated decision to cut interest rates last week, and new data shows owners are expecting to put the increased capital into action.
CNBC and SurveyMonkey's third-quarter Small Business Survey found that owners said lower interest rates would prompt them to increase their investments, expand their business or increase their inventory. The survey was conducted Sept. 3-9, ahead of the Fed meeting at which a rate cut was expected, among a national sample of 2,276 self-identified online small business owners ages 18 and older.
Main Street has been watching interest rates closely. Data from the National Federation of Independent Business, a small business lobbying group, found that interest rates on short-term loans were 9.5 percent in August this year, up from 7.6 percent in January 2023. Additionally, 60 percent of owners gave stated that they had not been interested in borrowing at the moment, in part due to high interest rates.
According to Holly Wade, director of the NFIB Research Center, lower rates can free up resources for owners to devote to other areas of their business, including maintaining competitiveness in hiring.
“It would be a big benefit for them to see if they can become more competitive in this area on wages and benefits and ease some of the cost pressures that they've been struggling with for about three years,” Wade told CNBC in an interview .
Inflation is closely linked to interest rates. One in three small business owners believe inflation has peaked in the CNBC-SurveyMonkey poll, up 9 points from last quarter's 24 percent. But two-thirds still believe it will continue to rise, even though optimism about inflation relief has reached its highest level since CNBC and SurveyMonkey asked the question and its highest this year. Still, owners are cautious, with 38 percent saying inflation is the biggest risk to their business, nearly three times higher than the next biggest risks, consumer demand and interest rates.
Additionally, overall confidence in the quarterly CNBC/SurveyMonkey poll rose to 51 out of 100. That's four points higher than last quarter and nine points higher than the same quarter last year and the first time during the Biden presidency that it has been above 50, a “net confident” reading.
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