Small Business Credit Survey – 2018 Results for the Seventh District

May 15, 2019

Thank you to the over 900 businesses across Illinois, Indiana, Iowa, Michigan and Wisconsin1 that participated in the latest round of the nationwide Small Business Credit Survey (SBCS).2 Your participation provided fresh information about the economic trends affecting small businesses in the area served by the Federal Reserve Seventh District.

While only the second year that the survey has been conducted in the Seventh District, this year’s results yielded some interesting findings:

  • Small firms in the Seventh District are older, and have more revenues and employees than their counterparts across the nation.
  • The profitability diffusion index fell district-wide, although the state-by-state results were mixed.
  • The percent of businesses operating at a profit in the Seventh District was on par with the nation.
  • Seventh District businesses seeking credit turned to a mix of potential sources, with banks being the most frequent option.
  • More than a third of Seventh District small businesses added employees in 2017.

1. Profile of Seventh District small businesses

Overall, the composition of small businesses in the Seventh District is similar to the nation. However, one of the most notable findings for the District is the predominance of older and larger firms among survey respondents. In the Seventh District, 29 percent of firms are under five years old, while 34 percent are under five years old nationally. There are a few notable differences in business age within the states of the Seventh District. Iowa has the fewest young firms, with only 27 percent under five years old, while Illinois approaches the national average, with 32 percent of firms under five years old.

As a whole, the Seventh District has more firms with at least five employees and more firms with revenues over $1 million than the nation as a whole. More than one-third of firms in the Seventh District report revenues exceeding $1 million, while 30 percent of firms nationally reach that mark. This difference is small but statistically significant. Similarly, employment responses show that while nationwide 45 percent of small businesses have five to 499 employees, in the Seventh District this is true for 47 percent of firms, again a small but statistically significant difference.

These distinctions are most pronounced for the states of Indiana and Iowa. In Indiana, 51 percent of firms have at least five employees and 38 percent of firms reported at least $1 million in revenue. There were 7 percent that reported at least $10 million in revenue, compared with only 4 percent of firms reaching $10 million nationwide. In Iowa, only 47 percent of firms have at least five 5 employees, matching the District average, but 40 percent of firms reported at least $1 million in revenue and 10 percent reported at least $10 million in revenue.

2. Profitability diffusion index

The profitability diffusion index (the difference between the percent reporting a profit and the percent reporting a loss) fell to 35 for the Seventh District, from last year’s mark of 38. However, the state-level picture is mixed. In Illinois and Indiana, profitability diffusion indices rose from 31 to 35 and from 32 to 39, respectively; in Michigan profitability fell, with the diffusion index dropping from 37 last year to 29 this year.

Profitability diffusion index: 2017 & 2018 survey results

3. Percent operating at a profit

Both nationally and in the Seventh District, more than half of small businesses reported a profit in the past year (58 percent in the District and 57 percent nationally), and about the same number reported revenue growth year-over-year. Firms in Iowa led the Seventh District in profitability, with 66 percent reporting profitability and only 19 percent operating at a loss, a similar spread to last year’s results for Iowa. Profitability results for Wisconsin do not permit a precise calculation of this year’s results.

Taken together, these two points illustrate that while the majority of Seventh District businesses are operating at a profit, cost pressures may be eroding the profitability of some businesses.

Percentage of firms operating at a profit: 2018 survey results

4. New loan applications

Only 22 percent of Seventh District small businesses sought credit from online lenders, compared to 32 percent for the rest of the country. Other loan sources like banks, CDFIs, and credit unions, are used with a frequency in the Seventh District on par with the nation as a whole.

In terms of financing, Indiana firms stand out as unusual in the Seventh District and nationally, with 15 percent of Indiana small firms seeking to raise capital via equity investment versus 6 percent for the country and 8 percent across the Seventh District.

Indiana and Iowa stand out for the availability and utilization of small bank lending. Iowa leads the nation with 81 percent of small business loan applicants seeking financing from a small bank; the national norm is 44 percent. Indiana also exceeds the national norm, with 55 percent of small business loan applicants going to small banks.

Seventh District small businesses look to small banks more than other sources for new credit: 2018 survey results

5. Employment change

Employment rose in the past year for 37 percent of firms nationally and in the Seventh District, while only 15 percent of firms in the District and 14 percent nationally reported a decrease in employment. Taken together, these results suggest an increase in net employment growth for small businesses – both for the Seventh District and for the nation as a whole.

More firms reported an increase in employment than a decrease: 2018 survey results


In the Seventh District, 32 percent of firms reported both employment and revenue growth and also anticipated no near-term declines in work force. This improved on last year’s survey results in which only 28 percent of firms met this definition of growth.

Overall, the 2018 SBCS results suggest that the state of small business in the Seventh District largely mirrors that of the rest of the country, with a few distinctions. To see the most recent SBCS release, please visit the release page: To learn more about the partnership and participating in the upcoming SBCS, please see the partnership page: To see all past reports, please see the reports page:; and for all the releases nationwide, please see the analysis page:

Click here to see a video of the data highlights for the Seventh District.

1 Wisconsin did not receive enough responses to report state level data for the 2018 survey, so state-by-state comparisons in this blog will only cover four states, Illinois, Indiana, Iowa and Michigan.

2 The SBCS is a convenience sample. Since the sample is not selected randomly, the survey may be subject to biases that are not present in randomly-selected samples of firms. To control for potential biases, the results are weighted using U.S. Census Data to reflect the full population of businesses along the dimensions of industry, age, employee size, and geography.


The views expressed in this post are our own and do not reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve System.


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