Puerto Rico’s small businesses are “persevering through… [the] economic crisis,” but are concerned about managing cash flow and rising operating costs, according to the findings of the Federal Reserve Bank of New York’s “Puerto Rico Small Business Survey” released Monday.
The inaugural survey focuses on the business performance, financing needs and borrowing experiences of firms across the island, and was designed by the New York Fed with input from partners in Puerto Rico.
It is modeled after the U.S. mainland’s “Small Business Credit Survey,” and is designed “to fill important knowledge gaps about the island’s small business financing conditions and flag potential economic growth opportunities for the Commonwealth,” the agency said.
“Small businesses are the backbone of our local and national economies and the New York Fed has long worked to provide more in-depth information on financing conditions for small firms on the mainland,” Kausar Hamdani, senior advisor and senior vice president in the Communications and Outreach Group at the New York Fed.
“By extending our small business coverage to include Puerto Rico, we are now broadening our understanding of the credit environment for all U.S. small firms. We also hope that the survey results will help advance the dialogue now underway on solutions to revitalize Puerto Rico,” Hamdani said.
The majority of the firms that participated in the study confirmed declining revenues. Furthermore, the study showed there is significant demand for credit with the most common reason being the need to meet operating expenses.
For about half of all small firms, credit needs were under $25,000.
Although a considerable portion of firms received all of the credit they applied for, one-third of applicants did not receive any of the credit that they applied for, the study further confirmed.
Among non-applicant firms, debt aversion was the most common reason for not applying. This marked a notable difference from the mainland where nearly half of non-applicants chose not to apply because they had sufficient financing.
About 80 percent of firms do not sell online or export their wares or services. Firms see this as a growth opportunity, ranking programs in support of growing sales — to the federal government, via online commerce, and through exports — as their top training need, the study noted.
Issued as a pilot this year, the Puerto Rico Small Business Survey collects information about business performance, financing needs and choices, and borrowing experiences of small businesses — defined as firms with fewer than 500 employees. Small businesses employ more than 80 percent of all private sector workers in Puerto Rico.
The results released Monday came from a survey conducted throughout the spring of 2016 that analyzed responses from more than 750 small businesses in Puerto Rico.
The results address three major topic areas: firm demographics and performance; demand for credit and outcomes; and top ranked training and business growth needs.
A broad network of Puerto Rico business and community organizations partnered with the New York Fed to design and implement the survey. They include: the Puerto Rico Economic Development Bank, the Puerto Rico Chamber of Food Marketing, Industry and Distribution (known as MIDA by its Spanish acronym); the United Retailers Association; Puerto Rico Trade and Commerce; Estudios Técnicos Inc.; Grupo Guayacán Inc.; Hecho en Puerto Rico; the Puerto Rico Statistics Institute; and the Minority Business Development Center, among others.
Later this month, New York Fed President William C. Dudley will travel to Puerto Rico to meet with leaders in the local community, government, business and education sectors, the agency announced Monday.