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Union Bank® Small Business Economic Survey: It’s Sunny in San Diego

Most Small Business Owners Believe the U.S., Local Economy, and Their Own Businesses Are Headed in the Right Direction

  • Post-election survey finds sentiment hopeful that the business climate will improve in the next two years; San Diego owners are more positive than West Coast peers
  • Those looking to hire are looking for full time staff; San Diegans are more likely to increase staffing in 2017 compared to the West Coast average
  • In California, nearly 25% of owners are concerned about minimum wage increase versus 34% of San Diego small businesses.

San Diego County CA— San Diego small business owners are significantly more confident about the national economy this year, according to results from the Union Bank annual Small Business Economic Survey. The 18th annual survey also found that hiring is on the rise, with San Diego small business owners increasingly planning to hire in 2017 compared to their West Coast peers.

Union Bank conducted the survey from Dec. 12, 2016 – Jan. 3, 2017, compiling results from nearly 700 small business owners in California, Oregon and Washington State, including 100 in San Diego. (Click here to download info-graphic PDF)

Overall, in San Diego, almost 57 percent of respondents said the United States is headed in the right direction, a significant increase from 2016 when only 31 percent of San Diegans agreed. In contrast, 62 percent of total West Coast survey participants said the United States, as an entity, is headed in the wrong direction. This reflects a five percentage point increase from 2016. San Diegans were generally more positive about the direction of the nation.

Feelings that the national economy and local economy are headed in the right direction also increased significantly for San Diego owners from 2016. More than 58 percent believe the national economy is on the rise (up 25 points from 2016). As for the local economy, San Diego’s entrepreneurs are also positive, with almost 56 percent stating it is heading in the right direction. Additionally, an overwhelming majority of local business owners indicated that their own business is headed in the right direction (92 percent, up five percentage points from 2016).

Local small business owners are also more positive about the future business climate than the rest of the West Coast. Over one-half (51%) believe the business climate will improve in the next two years. When all West Coast respondents were asked about the next two years, only forty-one percent believed the overall climate for small businesses will improve. Significantly fewer San Diego owners felt the climate will worsen in the next two years when compared to the West Coast average.

“The optimism shown by San Diego business owners is due to a number of factors, including the strength of its emerging bio-tech and technology sectors and solid employment base,” said Union Bank Managing Director Todd Hollander, Head of Business Banking. “These businesses have really taken off lately and this is contributing to the increase in small business growth. Plus, San Diego is a great place to live.”

Staffing, Sales and Capital Expenditures

While a majority of San Diego business owners (76%) plan to keep staffing levels stable, hiring is picking-up pace. Nineteen percent of local small business owners said they expect to hire additional employees in 2017, a 12.5 percentage point increase from last year.

Forty-one percent of local small business owners reported increased sales, a significantly higher number than their West Coast counterparts (32%). Twenty-seven percent of San Diego business owners plan to increase costs, also a significantly higher proportion than the overall survey. Some of these costs may be realized in the staffing areas as San Diego owners are more likely to increase staffing in 2017.

Twenty-one percent of those surveyed are planning on purchasing new or leased equipment and nine percent plan to add new locations, a jump of eight percentage points over the previous year. Not surprising, San Diego business owners are looking to increase capital expenditures. Twenty-seven percent indicated they plan to increase capital expenditures, up from last year when only nine percent of San Diego owners had these plans. This also varies from the total population surveyed — only 18 percent of their West Coast peers had plans to increase capital expenditures. Referrals from existing clients remain the most common means of generating new business (62 percent).

Impacts of Jobs Act, Affordable Care Act, Minimum Wage

While approximately seven in 10 San Diego small business owners said the 2010 Small Business Jobs Act has had no impact on their business, 33 percent indicated they did notice benefits last year, an almost 20- point increase from earlier in the year.

Almost sixty percent of San Diego business owners said their health care costs have risen as a result of the health care changes. However, for most of these local owners (68%), the Affordable Care Act has not impacted employment. Eleven percent said the Act has increased employment, a gain from 5 percent in 2016.

When asked about proposed changes to the minimum wage, nearly more than one-third of local business owners showed a high level of concern. West Coast small business owners surveyed were less concerned, with only 23 percent expressing extreme concern.

Federal Support for Small Businesses

San Diegans are more likely than their West Coast peers to feel that a mix of federal support was the best way to grow small business. Reduced regulation, lower interest rates, more government programs and greater access to credit – all these factors were ranked equally important to growth. Coast wide, however, small business owners believed increasing government programs was the overall best method to grow small businesses

There was a slight increase in the efforts San Diego business owners made to support equal pay. More business owners, a jump of nearly 17 percentage points, made an effort to address this issue over the previous year.

Access to Credit, Capital Spending

San Diego small business owners are significantly more likely than average to apply for credit in 2017.  The proportion of San Diego business owners planning to apply for credit in 2017 increased significantly over 2016, with 18 percent planning to apply for credit in 2017, up 14 percentage points from four percent last year.

 Most West Coast small business owners said access to credit to grow their business has remained constant over the past two years. However, San Diego business owners say access to credit to grow their businesses was much easier to achieve in the last two years. This year, 23 percent said it was easier to access credit, as compared to 10 percent in 2016.

The survey showed an increase in San Diego entrepreneurs applying for loans in 2017, and loan approvals were up seven percentage points to 77 percent, from 70 percent last year. Most San Diego business owners apply for loans at banks and credit union loans versus other financial sources.

“The survey results indicate there is increased access to credit within the banking industry, with more small business owners receiving loans or credit to help finance day-to-day operations and growth,” said Kirsten (Didi) Hakes, head of the SBA Lending group at Union Bank. “As the interest rate environment continues to change, it will be important to continue our dialogue with our clients to ensure they are prepared for any interest rate hikes and hedging where appropriate.”

However, local business owners are divided when asked if they are prepared for changing interest rates. Fifty-seven percent of business owners said they are prepared; while 43 percent are either unsure or admit to being unprepared.

Most local small business owners said they are working the same number of hours as they did during the same time last year (47 percent); 42 percent said they are working more; and 11 percent said they are working “somewhat or a lot less.”

Planning the Future: Ownership Structure

Slightly more San Diego business owners plan a change in 2017 in their business structure by incorporating rather than selling or merging. Eight in 10 small business owners said their business will continue to operate in its current form.

About the Survey

Union Bank, working with its survey partner, surveyed 693 respondents (591 in California and 102 in the Pacific Northwest) online from Dec. 12, 2016 to Jan. 3, 2017. The small business respondents were screened to ensure that they have been in operation for a minimum of two years with owners over the age of 25. The small businesses were defined for the survey as having $15 million or less in annual sales. The margin of error for the full sample is +/-4 percentage points. For the various regions, the margins of error are as follows: Southern California +/-4%, Northern California +/-7%, and Pacific Northwest +/-10%.

About MUFG Union Bank, N.A.

MUFG Union Bank, N.A., is a full-service bank with offices across the United States.  We provide a wide spectrum of corporate, commercial and retail banking and wealth management solutions to meet the needs of customers.  We also offer an extensive portfolio of value-added solutions for customers, including investment banking, personal and corporate trust, global custody, transaction banking, capital markets, and other services.  With assets of $115.6 billion, as of December 31, 2016, MUFG Union Bank has strong capital reserves, credit ratings and capital ratios relative to peer banks.  MUFG Union Bank is a proud member of the Mitsubishi UFJ Financial Group (NYSE: MTU), one of the world’s largest financial organizations with total assets of approximately ¥302.1 trillion (JPY) or $2.6 trillion (USD)¹, as of December 31, 2016. The corporate headquarters (principal executive office) for MUFG Americas Holdings Corporation, which is the financial holding company and MUFG Union Bank, is in New York City. The main banking office of MUFG Union Bank is in San Francisco, California.

1 Exchange rate of 1 USD=¥116.49 (JPY) as of December 31, 2016
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