Businesses without employees on payroll are a growing part of the U.S. economy, increasing in number by 81 percent over the past two decades, the Federal Reserve Bank of New York recently reported.
While they represent just 3 percent of business receipts, these non-employer firms are a source of primary or supplemental income for 17 percent of American workers.
According to the report, 43 percent of these firms said they may have unmet funding needs, and 26 percent applied for financing. Of those who did, 62 percent sought to expand their business and 42 percent sought funds to pay operating expenses. Further, 62 percent of applicants said they received at least some financing.
Community banks and community development financial institutions received a combined 45 percent of credit applications—compared with 46 percent for large banks, 39 percent for online lenders, and 15 percent for credit unions.
CDFIs and community banks respectively approved 71 percent and 43 percent of credit applications, compared with large banks (42 percent), online lenders (60 percent), and credit unions (38 percent).