Northwest small businesses have the brightest outlook in four years.

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PACIFIC NORTHWEST, February 26, 2015 Union Bank today announced the results of its annual Small Business Economic Survey, which showed that small business owners overall have the brightest economic outlook in four years. In 2014, nearly a third of entrepreneurs hired staff and significantly fewer reported layoffs.

For the first time since 2012, the majority of small business owners overall believe the economy is heading in the right direction, with an all-time high of 90 percent believing their business is headed in the right direction. The rise in optimism reflects data showing that more entrepreneurs worked longer hours in 2014 due to increased business (61 percent, up 6 points from 2013).

Despite the rosier economic outlook, hints of restraint remain in capital and labor budgets for 2015, with most Pacific Northwest owners planning to maintain the same capital spending and staffing levels as 2014. In addition, compared with last year, more than twice the Pacific Northwest owners (11 percent, up 6 points) plan to move their business out of state, primarily due to tax burdens and property and rent costs. While most entrepreneurs plan to stay put, significantly more owners from California (20 percent) plan to relocate compared with owners from the Pacific Northwest (11 percent).

“The survey results reflect what we’re seeing among small business owners who are encouraged about the economy and gradually hired additional staff in 2014,” said Union Bank Managing Director Todd Hollander, head of Business Banking. “Taxes remain a challenge for small business owners, especially in California, but as the economy continues to strengthen, labor and capital budgets will likely grow.”

Business Climate

Slightly more Pacific Northwest owners (41 percent, up 2 points) believe the business climate has improved in the past two years. This increased optimism is reflected in the outlook for the national economy, as significantly more Pacific Northwest owners than last year (55 percent, up 20 points) believe the national economy is headed in the right direction. In terms of their state’s economy, Pacific Northwest owners were slightly less optimistic than last year, with slightly fewer owners (50 percent, down 1 point) believing their state’s economy is headed in the right direction.

Among the industries surveyed, 100 percent of owners from the personal services sector (auto repair, salons, dry cleaning, etc.) believe their business is headed in the right direction (up 10 points); more owners from this sector also expressed optimism about the direction of the national economy (70 percent, up 42 points). In terms of their state economy, more owners from the professional services industry (physicians, certified public accountants, attorneys, etc.) believe their state’s economy is headed in the right direction (67 percent, up 5 points).

Retail store owners expressed the most pessimism about the economy — half believe the national economy is heading in the wrong direction and 53 percent believe their state economy is headed in the wrong direction.

Access to Credit

In the Pacific Northwest, slightly more owners (18 percent, up 3 points) applied for a loan or access to credit in 2014. Of those who applied, slightly more owners were approved in 2014 than 2013 (61 percent, up 1 point).

In 2014, more minority business owners (25 percent) applied for a loan or access to credit compared with respondents overall (13 percent). Of those who applied, more minority business owners (81 percent) were approved compared with 76 percent overall. Among those denied for loans, significantly more owners overall (58 percent) were able to find alternative financing in 2014 (up 20 points) than the previous year.

Helping small business owners obtain credit remains a priority for us, and its encouraging that alternative financing is a growing option overall and that more minority business owners were approved for loans in 2014, said Kirsten (Didi) Hakes, head of SBA Lending at Union Bank. Union Banks Business Diversity Lending and Community-Based Financing programs are two ways were helping to provide loan opportunities to women-, minority- and veteran-owned businesses, and we continue to see interest in these programs from business owners.

Union Bank, recently ranked* the countrys fifth largest SBA 504 lender in both units and volume, partners with community-based financing organizations with a goal of transitioning the companies into traditional business financing with Union Bank once their companies have grown, and many of the banks CBF partners also provide free or low-cost technical assistance programs (i.e. business planning, accounting, marketing, etc.) to assist with the continued goal of building credit worthiness of the client and investing back into the small business community.

While 50 percent of small business owners from Pacific Northwest have not experienced changes in their ability to access credit in the past two years, most (65 percent) do not plan to apply for credit in 2015. This may be related to another part of the survey which found that most Pacific Northwest owners were either unprepared (18 percent) or unsure about whether they were ready (37 percent) for a changing interest rate environment.

Labor and Capital Costs

In the Pacific Northwest, fewer owners (19 percent, down 7 points) incurred layoffs in 2014 compared with the previous year and 34 percent hired staff in 2014.

This year, slightly more owners (11 percent, up 2 points) are planning to add staff this year compared with last year. There was no change in the percentage of owners who plan to cut staff this year (3 percent).

Surprisingly, retail store owners the sector reporting the most pessimism about the economy were more likely than owners from other industries to add staff in 2014 (32 percent), while owners from the personal services industry the sector reporting the most optimism about the direction of their business and the national economy were more likely to cut staff (22 percent) in 2014.

In the Pacific Northwest, more owners plan to increase capital expenditures in 2015 (25 percent, up 9 points) and more owners plan to cut capital spending in 2015 than the previous year (22 percent, up 9 points).

Among industries, significantly more owners in the personal services sector (36 percent) plan to increase capital expenditures, while significantly more in the retail sector (41 percent) plan to decrease capital spending.

Government and Health Care

Slightly more Pacific Northwest owners than the previous year (20 percent, up 1 point) rated government efforts to stimulate business as good or very good and more Pacific Northwest owners believe that government actions taken since the economic downturn have benefited their business (31 percent, up 6 points). Overall, positive perceptions about government efforts were higher among owners of certified women and women-, minority- and veteran-owned businesses than non-certified businesses, with nearly a third (30 percent) of certified businesses rating government efforts as good or very good compared with 21 percent of non-certified businesses.

As expected based on the 2014 survey, certified businesses (9 percent) were more than twice as likely to report employment growth as a result of the Affordable Care Act compared with non-certified businesses (4 percent). Health care changes had a significantly smaller impact on cost increases among Pacific Northwest business owners in 2014, with 47 percent experiencing increased costs compared with 91 percent the previous year.