Small business confidence is tanking again, especially when it comes to banks and Biden

As President Biden begins to more forcefully build a reelection case citing Bidenomics, Wall Street forecasts and actual GDP data are supportive, as are recent improving sentiment scores from consumers and CEOs. But on Main Street, small business owners remain a difficult group for Biden to win over.

Small business confidence is back at an all-time low, according to the just-released CNBC|SurveyMonkey Small Business Survey for the third quarter. That’s nothing new for Biden, as small business confidence has hung around a low throughout his presidency. In fact, the latest decline in the confidence index to a score of 42 out of 100 matches the all-time low from exactly one year ago.

With a business owner demographic that skews conservative, the twin economic issues of inflation and rising interest rates have compounded the general concerns about a Democratic administration. But at a time when signs are pointing to progress in the fight against inflation and a potential though by no means certain end to Federal Reserve interest rate hikes, the Q3 data presents more specific — and potentially more troubling — concerns for the president.

Even with a resilient economy, with interest rates at a multi-decade high, the number of small business owners who say they can easily access the capital needed to operate their firms continues to decline, now at under half (48%) versus 53% last quarter. This should not come as a surprise, as higher interest rates make banks stricter when it comes to lending requirements, a dynamic that tends to disproportionately punish small businesses, and linger or even intensify the longer a higher rate environment persists. Even for businesses that can secure loans, double-digit percentage rates are a cash flow challenge.

Data released on Monday from small business trade group NFIB reported similar difficulty among business owners attempting to access capital, with over half (58%) who borrowed or tried to borrow reporting high interest rates as their biggest complaint, and 40% of owners saying interest rates were a significant issue in the ability to access capital.

Wall Street banks and Main Street lending

The latest monthly report from alternative lending firm Biz2Credit from earlier this month shows small business loan approval percentages at banks with over $10 billion in assets at 13.3% in July, an approval rate that has been falling steadily and, pre-pandemic, had been as high as 28.3% in February 2020.

Rohit Arora, CEO of Biz2Credit, noted in a release on his firm’s data that as regulators raise capital requirements at some large banks in the years ahead, steps being taken today to prepare include more hesitancy to lend to smaller companies, since these loans can often range from five to seven years in term length.

Beyond recent concerns about the stability of regional banks, rating agencies say that even the largest Wall Street banks are on downgrade watch, not a situation in which banks are likely to be more accommodating to the capital needs of small firms, and in fact, the CNBC|SurveyMonkey data recorded a sharp drop in financial system confidence among business owners who work with large banks.

When it comes to accessing capital, small firms that hold accounts with large banks recorded the largest drop quarter-over-quarter, a 10% decline, from 59% saying it was easy for them to access business capital down to just 49% now. That was a much larger decline than among business owners who bank with a regional bank (down 2% quarter over quarter) and those who work with a community bank (down 4%). The largest group of small businesses (41%) conduct their business with large banks.

SurveyMonkey’s analysis of the data pointed to a gap between business owners who express confidence and a lack of confidence in banks that has widened from just 1 percentage point in Q2 (49% confident, 50% not confident) to 9 points now (45% confident, 54% not confident) this quarter.

“These data are a good reminder that the general economy for small business owners can often be very different from the economy that consumers on one side or large corporations on the other are experiencing,” said Laura Wronski, research science manager at SurveyMonkey.

The CNBC|SurveyMonkey Small Business Survey was conducted among over 2,000 small business owners across the U.S. between August 7-August 14.

While concerns across the economy about the banking crisis have lessened since the last quarter, that is not reflected in the conditions that small businesses are facing.

“Banking concerns have become even more top-of-mind for small business owners now, with their confidence in the U.S. banking system weakening and their ability to access needed capital hampered,” Wronski said.

Biden’s business supporters are increasingly negative

The CNBC|SurveyMonkey quarterly confidence index includes a series of core sentiment indicators related to policy that contributed to the decline back to the all-time low, with more small business owners saying they expect immigration policy and tax policy to be a negative. 

That’s notable, according to SurveyMonkey analysis of the results, with these index components that had the largest drag on the overall scores not those tied to hiring or economic conditions, but “two factors that fall squarely within the remit of the president and Congress.”

Business owner expectations for revenue and hiring were largely unchanged, and the percentage that describe economic conditions as “good” changed only slightly, from 40% to 38%. More describe conditions as “middling,” up from 43% to 46% this quarter. But only 15% describe business conditions as “bad.”

“Small business owners seem to be more heavily factoring the political environment into their confidence estimations than the economic environment. The economy has shown promising growth over the last quarter, with fewer concerns about a recession economy-wide now and less immediate threat from a banking crisis,” Wronski said.

In the confidence index scoring, rather than broader survey questions, there was a notable drop for Biden. According to SurveyMonkey, overall approval of the president now matches the same level as Q3 2022 survey, with 31% saying they approve and 68% saying they disapprove of the way Joe Biden is handling his job as president. The small business survey data matches the overall trend in the recent FiveThirtyEight polling average.

But Wronski said, “What’s really surprising is that general confidence among small business owners is falling now for the first time among Biden’s supporters.”

With the overall confidence index back at the all-time low of 42, the gap in confidence index scoring specifically between Biden’s supporters and his detractors is now a record-low 18 points, according to SurveyMonkey (55 versus 37). Among survey respondents who identify as Democrats, the quarterly confidence score declined from 58 to 52, the lowest it has been since Biden became president. Among independents, the decline was from 49 to 42, the lowest it has been among these respondents since the first quarter of 2021. Republican confidence moved the least, declining from a score of 39 to 37.

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Bank of America execs blew $93.6 billion. Here’s how they did it.

In several notes to clients this month, Odeon Capital Group analyst Dick Bove has pointed out that Bank of America’s big spending on stock buybacks over the past five years has been a waste for its shareholders, with the bank’s stock price declining slightly during that period.

The idea behind repurchasing shares on the open market is that they reduce a company’s share count and therefore boost earnings per share and support higher share prices over time. This doesn’t seem to be a bad idea, especially for a company such as Apple Inc.
which has generated excess capital and has appeared to be firing on all cylinders for a long time. For a company that is continuing to expand its product and service offerings while maintaining high profitability, buybacks can be a blessing to shareholders.

But for banks, for which capital is the main ingredient of earnings power, a more careful approach might be in order. The data below show how buybacks haven’t helped the largest banks outperform the broad stock market over the past five years. And now, banks face the prospect of regulators raising their capital requirements by 20%, according to a Wall Street Journal report.

Before showing data for the 20 companies among the S&P 500 that have spent the most money on buybacks over the past five years, let’s take a look at how share repurchases are described in a misleading way by corporate executives — and by many analysts, for that matter. During Bank of America’s

first-quarter earnings call on April 18, Chief Financial Officer Alastair Borthwick said the bank had “returned $12 billion in capital to shareholders” over the previous 12 months, according to a transcript provided by FactSet.

Borthwick was referring to buybacks and dividends combined. Neither item was a return of capital. In fact, Bove summed up the buybacks elegantly in a client note on June 9: “The money that the company uses to buy back the stock is simply given away to people who do not want to own the bank’s stock.”

It is also worth pointing out that the term “return of capital” actually means the return of investors’ own capital to them, which is commonly done by closed-end mutual funds, business-development companies and some real-estate investment trusts, for various reasons. Those distributions aren’t taxed and they lower an investor’s cost basis.

Dividends aren’t a return of capital, either, if they are sourced from a company’s earnings, as they have been for Bank of America.

One more thing for investors to think about is that large companies typically award newly issued shares to executives as part of their compensation. This dilutes the ownership stakes of nonexecutive shareholders. So some of the buybacks merely mitigate this dilution. An investor hopes to see the buybacks lower the share count, but there are some instances in which the count still increases.

How buybacks can hurt banks

Banks’ management teams and boards of directors have engaged in buybacks because they wish to boost earnings per share and returns on equity by shedding excess capital. But Bove made another industry-specific point in his June 9 note: “If the bank buys back stock it must sell assets that offer a return to do so; it lowers current earnings.” Buybacks can also hurt future earnings. Less capital can slow expansion, loan growth and profits.

According to Bove, Bank of America CEO Brian Moynihan, who took the top slot in 2010 and saw the bank through the difficult aftermath of its acquisition of Countrywide and Merrill Lynch in 2008, “is one of the brightest, most capable executives for operating a banking enterprise.”

But he questions Moynihan’s ability to manage the bank’s balance sheet. Bove expects that Bank of America will need to issue new common shares, in part because rising interest rates have reduced the value of its bond investments.

In a June 5 note, Bove wrote: “Mr. Moynihan indicated twice [during a recent presentation] that the bank has excess cash that apparently could not be invested profitably. Possibly he is unaware that the cost of deposits at the bank in [the first quarter of] 2023 was 1.38% while the yield in the Fed Funds market can be as high as 5.25%.” In other words, the bank could earn a high spread at little risk with overnight deposits with the Federal Reserve.

That is a very simple example, but if Bank of America had grown its loan book more quickly over recent years while focusing less on buybacks, it might not face the prospect of a near-term capital raise, which would dilute current shareholders’ stakes in the company and reduce earnings per share.

Top 20 companies by dollars spent on buybacks

To look beyond banking, we sorted companies in the S&P 500

by total dollars spent on buybacks over the past five years (the past 40 reported fiscal quarters) through June 9, using data suppled by FactSet. It turns out 11 have seen prices increase more quickly than the index. With reinvested dividends, 12 have outperformed the index.



Dollars spent on buybacks over the past 5 years ($Bil)

5-year price change

5-year total return with dividends reinvested

Apple Inc.




Alphabet Inc. Class A




Microsoft Corporation




Meta Platforms Inc.




Oracle Corp.




Bank of America Corp.




JPMorgan Chase & Co.




Wells Fargo & Co.




Berkshire Hathaway Inc. Class B




Citigroup Inc.




Charter Communications Inc. Class A




Cisco Systems Inc.




Visa Inc. Class A




Procter & Gamble Co.




Home Depot Inc.




Lowe’s Cos. Inc.




Intel Corp.




Morgan Stanley




Walmart Inc.




Qualcomm Inc.




S&P 500



Source: FactSet

Click on the tickers for more about each company or index.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

The four listed companies with negative five-year returns are three banks — Citigroup Inc.
Wells Fargo & Co.

and Bank of America — and Intel Inc.

Don’t miss: As tech companies take over the market again, don’t forget these bargain dividend stocks

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The IRS is cracking down on a popular small business tax break that could lead to a costly audit

A cottage industry of specialist firms has sprung up to help business owners claim the Employee Retention Credit (ERC), a governmental tax incentive intended for companies stressed by the pandemic. But businesses need to be careful not to get hoodwinked. 

There are strict eligibility requirements for the ERC — one way it can be claimed is for wages paid during pandemic periods when gross receipts declined — and many owners may not really understand the criteria. This means they could inadvertently gloss over the opportunity and lose out on credit of up to $26,000 per employee. Or, they could easily be duped by dodgy providers into improperly seeking money they aren’t entitled to — with a hefty fee attached, of course — and likely ramifications down the road.

The problem is particularly pervasive given how easy it is to file for the credit and dupe small businesses in the process, said Donald N. Hoffman, a partner with Eisner Advisory Group. “Every business owner is getting dozens of emails and mail and being bombarded by television ads,” he said.

To be sure, the IRS warned business owners last October to be on the lookout for third parties promoting improper ERC claims. It renewed that warning in March of this year given what it said in a release “continue to be promoters who aggressively mislead people and businesses into thinking they can claim these credits.”

The IRS went so far as to add fraudulent claims involving the ERC to its annual “Dirty Dozen” list of tax scams. 

“The aggressive marketing of these credits is deeply troubling and a major concern,” said IRS Commissioner Danny Werfel in a release. “There are very specific guidelines around these pandemic-era credits; they are not available to just anyone.” 

These promotions may rely on inaccurate information about eligibility or how the credit is calculated, the IRS said. What’s more, some of these advertisements are designed to collect a taxpayer’s sensitive information, which is then used for identity theft purposes, the IRS said.

Here are important things owners need to know about the ERC to avoid issues, including in the worst-case scenario, an audit.

Start by understanding the basic ERC claim requirements

Start by knowing the basics so you can understand whether your business may qualify for a credit.

Eligible taxpayers can claim the ERC on an original or amended employment tax return for qualified wages paid between March 13, 2020, and Dec. 31, 2021, according to the IRS. Businesses can be eligible if they sustained a full or partial suspension of operations due to a pandemic-related government-ordered shutdown during applicable time periods. A business can also be eligible if it experienced a decline in gross receipts during the first three quarters of 2021, or a significant decline in gross receipts during 2020. Another way to be eligible is if the company qualified as a “recovery startup business” — a business started during the pandemic — for the third or fourth quarters of 2021.

Businesses can still be eligible for the credit if they received PPP loan forgiveness, which some owners may not realize, said Gina Perrone, a senior tax manager at accounting, tax and advisory firm Sax LLP. When the ERC was first created this was not allowed, but it was later revised. There are however, restrictions on double-dipping, which a tax professional can help ensure doesn’t happen.

Consult a CPA before signing with an ERC specialist

It’s very confusing for small businesses because of the various requirements, so it is advisable to consult with a CPA firm that is familiar with the ERC rules — even if a third party suggests the business automatically qualifies. There are many definitions and particulars that need to be sorted out to ensure that a business is, in fact, eligible. 

For instance, the definition of gross receipts for credit purposes is the one used by the Small Business Administration, and it refers to the figure reported on your tax return, Hoffman said.

Certainly, don’t sign an agreement with a third party before consulting with a trusted and reputable financial professional.

Learn to spot the ERC red flags to avoid an audit

Even though a provider may make it sound “super simple,” there are many complicated factors in determining eligibility, said Jenn McCabe, partner at accounting and consulting firm Armanino. Be wary of any firm that uses pressure tactics to encourage businesses to act quickly, she said. These firms sometimes charge hefty upfront fees or a fee that is contingent on the refund amount.

Another red flag is when a third party doesn’t ask for documentation to ensure a business owner qualifies, Perrone said. Businesses don’t have to provide that documentation to the IRS, but they should nonetheless ensure they are entitled to the credit to avoid costly headaches later on. If the business wasn’t really eligible, but received the credit and is later audited, it will owe the money back with penalties and interest, Perrone said. This can occur several years later, and meanwhile, the business has already paid the third party and is unlikely to recover those funds, Perrone said. 

To help avoid an audit, “make sure you can substantiate your claim and your eligibility requirements,” Perrone said.

If your business does qualify, next steps with tax return

Once the business ascertains it qualifies, the next step is to file Form 941-X, an amended quarterly payroll tax return, for each quarter for which the business seeks credit. For 2020, businesses have until April 15, 2024 to file; for 2021, they have until April 15, 2025, Perrone said. 

Businesses that file for the credit also need to amend their applicable tax returns to account for the additional income based on the year they qualified for the credit. “They cannot just report the income in the year they received the cash,” Hoffman said.

Also know that professional standards prohibit CPAs from charging contingency fees for preparing original or amended returns — a necessary step in receiving the credit. 

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Owe the IRS more in tax than expected? These are the next steps for business owners

Some small businesses may have received an unwelcome surprise at tax time.

As the U.S. continues to emerge from the pandemic, certain businesses might be seeing improved revenue and owe more taxes than they have in the past few years. Tax law changes in 2022 are also causing some shocking tax bills in the small business world. Meanwhile, newly self-employed often mistakenly equate gross pay and net pay, without taking taxes into account. “If you’ve been living as if the money that’s in your bank account is your net pay, that can be a rude awakening,” said Andy Phillips, director at The Tax Institute at H&R Block.

If owners haven’t estimated appropriately, or have spent the cash elsewhere, it can create large problems. It can be especially vexing since the first estimate for the current tax year is generally due at the same time as last year’s tax bill, a double-whammy.

But a larger-than-expected income tax bill doesn’t have to sink the ship. Here are ways small businesses can handle unexpectedly high tax bills.

File even if you can’t pay the whole IRS bill.

Some small businesses may not have filed their taxes by April 18 this year because they don’t have the money to pay their bill. They should still file as soon as possible, however, to mitigate the IRS’s “Failure to File” penalty, which applies to taxpayers who have a tax liability and don’t file by the due date. The penalty is a percentage of the taxes you didn’t pay on time.

If seeking an extension, you still have to pay.

Some business owners likely have sought an extension, thinking this will allow them to push off their payments without financial repercussions. “It’s an extension to file, not an extension to pay,” said Kimberly Wilkinson, senior tax manager at Wiss & Company.

Check for local disaster exceptions to filing.

Certain taxpayers may be able to benefit from IRS extensions for filing last year’s taxes and 2023 estimated taxes due to disaster situations in their local area. To learn more, they can visit the section of the IRS’s website specifically dedicated to this topic. “It’s a tremendous relief for those that are impacted,” said Michael Prinzo, managing principal of tax with CliftonLarsonAllen in Greenwood Village, Colorado.

Review payment plan options.

Owners who need more time to pay may qualify for a short-term or long-term payment plan. They can visit the relevant section of the IRS’s website to see what’s available, as well as potential costs and filing options.

Owners should keep in mind the IRS’s “Failure to Pay” penalty based on how long their overdue taxes remain unpaid. Though future penalties may be reduced by setting up a payment plan, it’s advisable to pay off the tax liability as soon as possible to limit the adverse effects of accruing interest. 

Don’t dip into payroll tax money.

Sometimes small business owners with employees try to tap money earmarked for payroll taxes to pay their personal taxes. That’s not allowed and could result in a stiff penalty. “It’s incredibly important that small business owners never borrow from their payroll withholdings to pay anything else,” Phillips said.

Consider personal loans, credit even at higher interest rates.

A small business owner who needs cash to pay his or her taxes might consider a bank or credit card loan or some other type of short-term financing, such as tapping an existing line of credit if available. Interest rates may be high for some of these options — in many cases reaching into double-digits on a percentage basis after a year of Federal Reserve rate hikes. But owners have to weigh credit costs against the penalties and interest they’ll accrue from the IRS, according to Anne Zimmerman, president and founder of Zimmerman & Co CPAs and co-chair of Small Business for America’s Future, a national coalition of small business owners and leaders. “Don’t use the IRS as your banker,” Zimmerman said.

Consider filing an amended return.

It behooves small businesses to take a second look at their tax return and consider filing an amended return if they are able to eke out additional deductions.

“Often business owners aren’t taking advantage of all the things they’re entitled to,” Prinzo said. “Make sure there haven’t been any missed planning opportunities.”

For example, there are favorable rules associated with taking accelerated depreciation, often referred to as bonus depreciation, which can help lower the tax burden.

In addition, there may be additional opportunities to deduct expenses, such as software, advertising or certain professional service fees, Phillips said. Small business owners may also be able to deduct home office expenses, if applicable. 

For many small business owners, personal tax benefits can also reduce the taxes due. Owners may not have taken into account new life circumstances that could qualify them for a tax benefit or benefits, such as marriage, having children, caregiving for certain individuals or education expenses. “Life changes generally mean tax changes,” Phillips said.

Work with a CPA to plan ahead, and potentially defer taxes.

Planning ahead with a CPA can help ensure owners aren’t blind-sided in the future.

For instance, if an owner sees in the middle of the year he or she is making more money, estimates can be tweaked to minimize some of the impact at income tax time. “The goal is to have your tax paid by the end of the year,” Wilkinson said.

Small businesses could also consider setting up a tax-deferred retirement plan for 2023, which can help with tax savings, said Cary Carbonaro, a certified financial planner with Advisors Capital Management in Winter Garden, Fla. A client recently did this mid-year and eliminated the need for a $300,000 estimated tax payment, Carbonaro said.

Thanks to recent passage of the SECURE 2.0 retirement savings legislation, there could be additional tax benefits for certain business owners who start tax-deferred retirement plans, so that’s also worth investigating, Prinzo said. Secure 2.0 encourages small business owners to create retirement savings plans through starter plan options and tax credits for both administrative costs in setting up a plan and making employee match contributions.

Nevertheless, even if you take all these steps, it’s still important to keep enough cash on hand for the next tax cycle, just in case there’s another surprise.

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