The 2016 Small Business Credit Survey shows the majority of employer small businesses report facing financial challenges and experiencing funding gaps. The report, released Tuesday by the 12 Federal Reserve Banks, examines the results of an annual survey of business conditions and the credit environment faced by small business owners who have full- or part-time employees. The survey reveals data from firms across all 50 states and the District of Columbia. According to the data, while some firms were profitable and optimistic in 2016, the majority reported significant credit challenges. About half of the firms surveyed were profitable and had growing revenues, with 61 percent expecting revenues to grow and 39 percent anticipating job growth in the coming year. Yet in spite of their optimism, 61 percent of firms also reported facing financial challenges in the last 12 months. The top challenges were accessing necessary credit and meeting operating expenses. More than 75 percent of the firms addressed financial challenges by using personal finances before taking on additional debt. The smallest firms faced the biggest challenges when it comes to obtaining funding. Sixty-seven percent reported a gap in funding versus 45 percent of larger firms. The smallest businesses were also more likely to rely on personal finances to operate during these gaps. “Despite their outsized role in the U.S. economy, many small businesses lack the financing necessary to stabilize and grow their businesses,” said New York Fed President William C. Dudley. “Supporting access to capital and effective financial management empowers small businesses to thrive in today's evolving economy, so that they can continue driving job growth and innovation.” Most of the business owners surveyed relied on their personal credit scores to obtain financing. Forty-five percent of firms applied for financing, with half applying at large banks and 46 percent at small banks. Loans or lines of credit were the most frequently-sought lending products. Loan applicants had greater success at community development financial institutions, small banks and online lenders than at large banks.