Fed survey: Small business optimism wanes as performance metrics hold steady

Small businesses pared back their outlooks for growth in a newly released survey by the 12 Federal Reserve Banks.

Their expectations for revenue and employment growth declined to their lowest levels since 2020 but remain well above that low point, according to the 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey.

Actual performance metrics - for revenue, employment and profitability - held fairly steady but remain below prepandemic levels. For the second year in a row, slightly more firms reported revenue declines than increases.

More insights:

• Challenges: Rising costs was by far the top financial challenge. Reaching customers and growing sales was the top operational challenge.
• International trade: 48% of respondents said they sourced at least some inputs from outside the United States in 2024, and 84% of those firms said those inputs now cost more. Within that group, 76% passed on at least some of those cost increases and 60% absorbed at least some portion. Relatively few changed suppliers or relocated production to the US.
• Online lending: The share of firms that applied at online lenders increased for the fifth consecutive survey year and is now similar to the rate applying at small banks. Many firms said they turned to online lenders seeking faster decisions and a better chance of being funded, but 60% said borrowing costs at these lenders were higher than expected.
• Debt: The share of firms with no debt increased to 31% from 29%, consistent with prepandemic levels. However, the share of firms holding more than $100,000 in debt remains elevated at 38%.
• Artificial intelligence: 46% of firms are using AI in some way. The most common uses were writing or marketing, individual productivity, and planning or analysis. Of the firms that do not plan to use AI (33%), over half said the reason is that AI is not applicable to their business.

The national survey was fielded from September 3 to November 14, 2025. It yielded 6,525 responses from firms with between 1 and 499 full- or part-time employees.

Get the report - and the Excel data: 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey