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Half of U.S. small-business owners say that rising interest rates over the past 18 months have eroded their margins, reduced revenue and reversed their growth, a survey conducted by Alignable showed, Bloomberg News reported. Rates would need to fall substantially before business would improve, according to the online referral network for small businesses. The survey is based on a poll of 7,396 randomly selected small-business owners from Aug. 4 to Sept. 18. More than two-thirds say that a decline in interest rates of at least 3 percentage points would be needed before they envision business activity rebounding again. Among the reasons cited for the decline in business were variable-rate Small Business Administration loans which change based on the actions taken by the Federal Reserve. The Fed has increased the range of its benchmark rate by more than 5 percentage points to a 22-year high of 5.25% to 5.5%. Others cited the cumulative effects from labor issues, rent spikes, inflation and an inability to raise prices at a similar pace. A pickup in gasoline prices has also had a negative economic impact. The real estate industry and housing-related services were the most impacted by higher borrowing costs.

U.S. small business confidence edged up to an eight-month high in July, as concerns about inflation fell to the lowest level in nearly two years, a report released on Tuesday showed, Reuters reported. The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose nine-tenths of a point to 91.1 last month, hitting the highest level since November 2022. Disinflation in July appeared to resonate with small businesses as only 21% stated that inflation was their biggest concern - the lowest reading since November 2021 and down 13 points from a year earlier. The continued improvement in optimism appeared to translate in investments in labor and capital investment plans: More than a quarter of firms reported plans to invest in capital, and 17% reported plans to increase employment, both 2 percentage points higher than in the prior month.

The federal program for small-business lending is undergoing its biggest makeover in decades, the Wall Street Journal reported. The Small Business Administration is simplifying loan requirements, automating more of the process and expanding the pool of nonbank lenders licensed to issue SBA loans. The moves, many of which take effect Aug. 1, will make it easier for financial-technology firms to participate. SBA officials say that they want to boost credit to small businesses that have struggled to get financing as banks favored bigger commercial borrowers. But the changes — and the decision to couple relaxed requirements with new lenders — have drawn criticism from the industry and members of Congress, who say the revisions could jeopardize the program by increasing loan defaults. Legislation sponsored by Senate Small Business Committee Chairman Ben Cardin (D-Md.) and co-sponsored by ranking member Joni Ernst (R-Iowa) would direct the SBA to conduct annual stress tests of licensed small-business lending companies, which aren’t overseen by federal banking regulators, and add guardrails and speed bumps to the processing of loans by new nonbank licensees. The legislation would also make permanent a pilot program aimed at helping underserved borrowers secure small-dollar loans.