EXECUTIVE SUMMARY:

The 2025 Report on Employer Firms, based on data from over 7,600 small businesses across the U.S., offers an in-depth look at the performance, challenges, and financing trends faced by small employer firms in 2024. While employment levels held steady, revenue performance declined for the second year in a row. Rising costs, weak sales, and limited access to affordable credit continue to weigh heavily on small businesses.

Notably, only 19% of small businesses qualified as “growing”—those that increased revenue, added jobs, and planned to grow their workforce. Businesses turned increasingly to personal funds and small lenders to stay afloat. Meanwhile, satisfaction with large and online lenders dropped sharply, with high interest rates and poor loan terms being common complaints.

Most small businesses served local or regional markets, and nearly 60% rented their operating space. A significant number also relied on individuals, not businesses or government contracts, as their primary customers.

How Small Businesses Performed in 2024

In 2024, more than 7,600 small businesses across the U.S. shared how they were doing in a big survey by the Federal Reserve. These businesses had between 1 and 499 workers.

Here’s what they said:

• 📉 Revenues dropped: For the first time since 2021, more businesses said their revenue went down than up.

• 👥 Jobs held steady: The number of employees mostly stayed the same.

• 🧾 Profits were mixed: 46% of businesses made money, but 35% lost money.

Even though things didn’t get worse, they didn’t get much better either. Many businesses said it’s still tough to grow after the COVID-19 pandemic.

📊 Only 19% of businesses were “growing” – meaning they increased both their sales and number of employees.

Table of Contents

• EXECUTIVE SUMMARY:

  • Biggest Challenges for Small Businesses

    • Getting a Loan in Today’s Market

      • Who Small Businesses Serve and Where They Work

        • Key Stats at a Glance

          • Final Thoughts: What This Means for Small & Medium …

Biggest Challenges for Small Businesses

Running a business isn’t easy—especially when prices and wages keep going up. Here are the top problems business owners shared:

1. Rising Costs

• 75% said the cost of things like goods, services, and wages was their biggest problem.

• Over half also struggled to:
  

  • Pay everyday expenses like rent and payroll (56%)

  • Manage uneven cash flow (51%)

To stay open, many business owners used their own money or raised prices. In fact:

• 55% used personal funds

• 48% used cash reserves

• 38% raised prices

2. Reaching Customers

• 57% had trouble finding new customers or making sales.

• This issue jumped from 53% in 2023.

3. Hiring and Tech

• 51% had a hard time finding or keeping good workers.

• 29% struggled with technology like websites or cybersecurity.

  Despite fewer supply chain problems and some pandemic recovery, many firms still face daily pressures that limit growth.

Getting a Loan in Today’s Market

Money is fuel for any business. But in 2024, getting a loan wasn’t easy—and for some, it was impossible.

Who’s Asking for Financing?

• 59% of businesses asked for new financing.

• Most asked for less than $50,000.

• The top reasons were:

  • To cover operating costs (56%)

  • To expand or grow (46%)

What Did They Get?

• Only 41% got everything they asked for.

• 36% got some

• 24% got nothing

The biggest reason for getting denied? Too much existing debt. In fact:

• 41% of denied businesses were turned down because they already owed too much, up from 22% in 2021.

Where Are Businesses Going for Loans?

The number of businesses applying at large banks went down:

• Large banks: ↓ from 44% to 39%

• Small banks, credit unions, online lenders: stayed about the same

Businesses that applied at small banks had the highest full approval rate: 54%

Online lenders were the least satisfying:

• Net satisfaction dropped from 15% to 2%

• Main complaints: high interest rates, bad repayment terms, confusing processes

👎 In fact, 75% of those who used online lenders said they faced high interest rates.

Who Small Businesses Serve and Where They Work

Beyond money and operations, the survey asked who businesses sell to and where they are located.

Who Are the Customers?

• 67% sell to individual people

• 45% sell to other businesses

• 15% sell to local or state governments

• 7% sell to the federal government

Where Are Their Customers?

Most businesses are local:

• 59% serve customers within 50 miles

• 21% serve them at the business itself

• Only 7% have international customers

Where Are Businesses Located?

• 59% rent their space

• 17% own it

• 17% work from home

• Only 3% are fully online

Relocation is less common now:

• In 2024, 25% moved in the past 5 years (down from 31% in 2019)

Why move?

• 53% needed more space or better features

• 52% were expanding

• 27% moved for cost savings

Key Stats at a Glance

Final Thoughts: What This Means for Small & Medium Sized Businesses

Small businesses are the heart of local communities. But they are still facing tough conditions in 2025. Costs are high. Revenues are shaky. Financing is limited—and even when it’s available, it often comes with strings attached.

The good news? Many businesses are staying resilient. They’re using their own funds, pivoting to find new customers, and working with lenders who understand them—especially local community banks.

If you run a small business, here’s what you should take away:

1. 💸 Keep an eye on your debt – Too much can hurt your chances of getting more.

2. 🏦 Work with banks that know you – Small banks are more likely to say “yes.”

3. 📈 Don’t be afraid to ask for help – Whether it’s a mentor, grant, or friendly lender, there are resources out there.

Want to Learn More?

The Small Business Credit Survey is packed with helpful info. Check out the full 2025 Report at fedsmallbusiness.org to see how your business compares.

✅ 4 Actionable Steps for Small Businesses

1. Build a Relationship with a Local Bank or Credit Union
   Small banks had the highest approval rates (54%) and significantly better borrower satisfaction than online lenders. Forming a relationship early can help you secure better terms when you need funding.

2. Monitor and Manage Debt Levels Proactively
   In 2024, 41% of loan denials were due to businesses carrying too much debt. Before seeking new financing, assess your current liabilities and consider refinancing or paying down existing obligations.

3. Diversify Your Customer Base and Sales Channels
   With 57% of businesses struggling to reach customers, it’s critical to expand marketing efforts—especially online. Consider targeting B2B or government contracts to reduce reliance on local consumer traffic.

4. Plan for Cost Management and Cash Flow Stability
   Since 75% of firms faced rising costs, controlling overhead and preserving cash is essential. Keep an emergency reserve, regularly review your P&L, and explore price adjustments or efficiency upgrades to stay resilient.

By focusing on these four areas—banking relationships, debt control, customer strategy, and cost management—small businesses can better weather the financial pressures of 2025 and position themselves for long-term growth.