Small business confidence weakened heading into 2026. The Federal Reserve Banks' 2025 Small Business Credit Survey put the revenue growth expectations index at 33 and the employment growth expectations index at 23 — both the lowest readings since the 2020 survey, which was fielded in the first year of the pandemic.
What is a small business confidence index?
A confidence index is a single number summarising whether business owners expect things to get better or worse. Most are built as a diffusion index: the share of firms expecting growth minus the share expecting a decline. A reading of zero means optimists and pessimists cancel out. Higher is more optimistic. The number is not a percentage and cannot be read as one.
The Federal Reserve Banks publish two such indices for small employer firms through the Small Business Credit Survey, one for revenue expectations and one for employment expectations, each looking 12 months ahead. The 2025 survey behind the 2026 report was fielded from September 3 to November 14, 2025 and drew 6,525 responses from firms with 1 to 499 employees across all 50 states and the District of Columbia.
Because it is a diffusion index, direction matters more than level. A fall from 39 to 33 does not mean revenue is falling. It means the balance of owners expecting growth has thinned.
How confident are small businesses going into 2026?
Less confident than at any point since 2020, but nowhere near 2020's lows. Here is the full published series for both indices by survey year:
| Survey year | Revenue index | Employment index |
|---|---|---|
| 2018 | 63 | 38 |
| 2019 | 58 | 38 |
| 2020 | 1 | 16 |
| 2021 | 42 | 31 |
| 2022 | 35 | 27 |
| 2023 | 38 | 28 |
| 2024 | 39 | 26 |
| 2025 | 33 | 23 |
The underlying splits are less gloomy than the indices alone suggest. Looking 12 months ahead, 56 percent of firms expected revenue to increase, 21 percent expected no change, and 23 percent expected a decrease. On employment, 36 percent expected to add staff, 51 percent expected no change, and 13 percent expected to shed staff. A majority still expects revenue growth. What has changed is that the pessimistic share has grown enough to pull the balance down.
What is driving the decline in confidence?
Costs, overwhelmingly. 77 percent of firms experienced challenges associated with rising costs in the prior 12 months. Asked to name their financial challenges, 73 percent cited increased costs of goods, services, or wages, the single most-cited item on the list, followed by paying operating expenses at 54 percent, uneven cash flow at 50 percent, and weak sales at 48 percent.
Two further items are worth separating out. 42 percent named increased costs associated with tariffs, a response option added to the questionnaire in 2025, which means there is no prior-year comparison for it. And 33 percent named making payments on debt or interest rates, while 29 percent named credit availability, a reminder that the cost of money is a live pressure alongside the cost of goods.
On the operational side, the top challenge was reaching customers and growing sales at 57 percent, ahead of hiring or retaining qualified staff at 46 percent and supply chain issues at 30 percent. Only 6 percent of firms reported no financial challenges at all.
What weaker confidence means for your funding decisions
It changes the questions worth asking, not necessarily the answer. When owners expect flat revenue, the risk inside any fixed repayment obligation rises, because the plan that services it depends on growth that may not arrive. That argues for sizing borrowing against revenue you can already evidence rather than the forecast you hope to hit.
It also argues for looking at more than one offer. Credit availability was a named challenge for 29 percent of firms, and in a cautious market the spread between what different lenders will do for the same business widens. The Broker Shop is a funding broker, not a lender. One 2-minute application goes to the lenders in our network of 50+ whose guidelines you already meet, so you compare real offers instead of guessing. It is free to apply, and checking your options won't affect your credit score.
For the wider picture, see our reading of 2026 small business funding trends, the revenue benchmarks by stage that show where your firm actually sits, and small business cash flow statistics for the pressure behind the sentiment.
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One 2-minute application is matched to the funders whose guidelines you meet. It's free, and checking your options won't affect your credit score.
See What I Qualify For →The bottom line: Small business confidence entering 2026 is at its weakest since 2020 and the cause is cost pressure rather than collapsing demand, since a clear majority of owners still expect revenue to grow.
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