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From zero to one: Small businesses that aim to begin hiring are more likely to apply for financing—but less likely to get it

October 14, 2025

Among small businesses with no employees, those planning to hire soon are more likely to apply for financing—but less likely to get it—than those with no plans to hire, according to a new report from the 12 Federal Reserve Banks.

Those potential employers were optimistic about their growth prospects, according to the report, which is based on the 2024 Small Business Credit Survey. But they also were more likely to have faced financial challenges during the prior 12 months.

Key stats:

  • Denial rates: Of the three groups studied, younger nonemployer firms looking to add staff had the hardest time getting financing. The denial rate for those early-stage potential employers was 50%. The denial rate was 42% for older, “later-stage” potential employers and 34% for “stable nonemployers” (those not looking to add staff).
  • Debt: 65% of later-stage potential employers had at least some debt, compared to 51% for all nonemployer firms. They also applied for larger amounts of financing.
  • Finding help: 51% of later-stage potential employers used contractors, compared to 36% for all nonemployer firms. They also were much more likely to report hiring as a challenge.
  • Tapping the piggy bank: 30% of early-stage potential employers received funds from their owners over the prior 12 months. That compares to 24% for all nonemployer firms.

By the numbers:

FSB-employers chart image

The report includes data from 5,955 nonemployer firms. The survey was conducted from September 4 to November 4, 2024.

Read the report: 2025 Report on Nonemployer Firms: Findings on Hiring Plans from the 2024 Small Business Credit Survey

Questions? Contact Chuck Soder: chuck.soder@clev.frb.org, 216.672.2798

About the Small Business Credit Survey

The Small Business Credit Survey (SBCS) is an annual survey of firms with fewer than 500 employees, including firms with no employees. Respondents are asked to report information about their business performance, financing needs and choices, and borrowing experiences. Responses to the SBCS provide insights into the dynamics behind lending trends and shed light on various segments of the small business population. The SBCS is not a random sample; results should be analyzed with awareness of potential biases that are associated with convenience samples. Get detailed information about the survey design and weighting methodology.