Small Business Outlook for Expansion

According to the NFIB Small Business Survey as of the month end of August 2019, the enthusiasm for
expansion has declined from the same time last year, but is still historically high compared to averages
over the last 5 years. The current reading is 26%, which is a decrease of 8% points or 24% from last
year’s level. The average for the August survey result over the last 5 years is 15%. The current reading
of 26% is 11% points higher than the 5 year average, a whopping 73% increase. So while expansion
optimism may be moderating, it is still historically high for the small business sector.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.

Small Business Outlook for Expansion

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