Respondents were asked to characterize recent changes in optimism among the small businesses that their organization serves.
Rising costs and tariffs Economic uncertainty Federal spending cuts Tightening of lending standards Hiring workers Uncertain policy and regulatory environment
https://www.fedsmallbusiness.org/analysis/2025/2025-survey-of-business-resource-organizations
Small Businesses Getting Smaller: Insights from the 2025 Federal Reserve Survey. The phrase "small businesses getting smaller" captures a sobering trend emerging from the Federal Reserve's latest 2025 Survey of Business Resource Organizations, released in April and reflecting conditions as of early 2025. Conducted from April 7 to 17, this annual pulse-check gathered input from 143 leaders at small business support groups—like Chambers of Commerce, Small Business Development Centers (SBDCs), industry associations, and community development organizations—on the health and outlook of the entrepreneurs they serve. The results paint a picture of eroding confidence, with over half of respondents noting a decline in optimism among their small business clients for revenue growth, employment expansion, and capital investments compared to six months prior. This marks a shift from more stable or positive sentiments in prior years, amid a cocktail of macroeconomic pressures. Key Drivers of Declining Optimism. Respondents were indeed asked to characterize shifts in small business sentiment, and open-ended responses highlighted a cluster of interconnected challenges. While the survey doesn't quantify these with exact percentages (focusing instead on qualitative themes), the factors you listed align closely with the most frequently cited culprits. Here's a breakdown based on the survey's analysis:
Factor
Description from Survey
Impact on Small Businesses
Rising Costs and Tariffs
Top concern; includes supply chain disruptions from tariffs on imports (e.g., from China and Canada), higher material/labor prices, and squeezed margins.
Delayed investments and weaker consumer demand; many firms report passing costs to customers, risking lost sales.
Economic Uncertainty
Broad worry over weakening demand, inflation persistence, and recession fears.
Leads to cautious planning—e.g., postponed expansions or hiring—exacerbating a slowdown in activity.
Federal Spending Cuts
Reductions in government contracts and grants, hitting sectors like construction and minority-owned firms hardest.
Direct revenue hits; some organizations noted "canceled federal contracts resulting in immediate losses."
Tightening of Lending Standards
Banks raising rates and tightening criteria, making credit scarcer and costlier.
Fewer loans for working capital or growth; a minority of respondents saw slight improvements, but most flagged declines in access.
Hiring Workers
Labor shortages intensified by immigration policy shifts, wage pressures, and competition from big employers.
Difficulty filling roles in services, retail, and manufacturing; contributes to operational strains.
Uncertain Policy and Regulatory Environment
Volatility in rules (e.g., around taxes, environment, trade) hinders long-term strategy.
Interferes with bidding on opportunities and compliance costs; ties into broader uncertainty.
These themes emerged from thematic coding of comments, with tariffs, prices, and uncertainty dominating as "principal ways" optimism is eroding. Notably, no respondents reported widespread increases in optimism—positive outliers were rare, like a "rise in small business starts" or hopes for future credit easing.
