Owners of small employer firms (firms with one to 499 employees) were surveyed in the fall of 2025 for the Small Business Credit Survey (SBCS).1 This article highlights key findings for 894 small employer firms ("firms") across the Federal Reserve's Third District states: Delaware, New Jersey, and Pennsylvania.2 Interactive figures can be filtered to view estimates for New Jersey, Pennsylvania, or the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD metropolitan statistical area ("Philadelphia metro").3 The text discusses regional trends and notes geographic differences.

Firm Conditions

Small businesses in Delaware, New Jersey, and Pennsylvania navigated a challenging financial landscape in the fall of 2025. Nearly half reported year-over-year revenue declines, although firms in Pennsylvania and the Philadelphia metro saw somewhat smaller drops than those in the region overall. About one-third of businesses managed to grow revenue despite headwinds. These revenue pressures shaped how firms viewed their financial health. Most characterized their financial conditions as poor or fair, with stark differences by state: Seventy-four percent of New Jersey firms reported poor or fair conditions compared with 50 percent in Pennsylvania. Debt levels among the region’s firms held relatively steady, with about a quarter carrying no debt in 2025.



Over one-third of the region’s small businesses applied for loans, lines of credit, or merchant cash advances, primarily seeking business loans and business lines of credit. Moderate shares pursued Small Business Administration (SBA) loans or SBA lines of credit, merchant cash advances, and auto or equipment loans. Home equity loans or lines of credit were relatively uncommon regionally but saw notably higher use among New Jersey firms (14 percent) than among firms in Pennsylvania (2 percent) and the Philadelphia metro (4 percent).



Challenges in 2025

The operational and financial challenges of small businesses in the region have remained relatively consistent with those of recent years. The figure below shows that the most common operational challenges in 2025 were reaching customers or growing sales, hiring or retaining qualified staff, and supply chain issues.

Firms continued to face financial challenges with increased costs, paying operating expenses, and weak sales. Nearly half of small businesses also reported challenges with uneven cash flows and increased costs associated with tariffs. More New Jersey firms reported challenges with paying operating expenses (67 percent) and weak sales (55 percent) than Pennsylvania firms (49 percent and 43 percent, respectively). Those with financial challenges responded most often by using personal funds, raising prices, using cash reserves, or reducing costs. New Jersey firms were more likely to respond to financial challenges by using personal funds and taking out debt than Pennsylvania firms.

Explore different challenges and actions taken by selecting a survey question and geography from the drop-down lists below.



Artificial Intelligence Usage

As part of an optional survey module, small businesses were asked about their use of artificial intelligence (AI).4 The region’s firms showed modest AI adoption compared with the United States overall. Just over one-third of these businesses reported currently using AI, compared with 46 percent nationally. The top challenges reported by AI adopters were accuracy, adapting tools to meet business needs, and time required for implementation or employee training.5



Nearly half of the region’s firms reported no current AI use and no plans to adopt it — notably higher than the national rate of 33 percent. The most common reason cited was that AI is not applicable to the business, although many firms also said they prefer not to use it or have concerns about accuracy.6  A smaller share of businesses in the region are either planning to use AI within 12 months (13 percent) or are unsure about their AI use (5 percent).

Appendix7


  1. The views expressed in this article are solely those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. Any errors or omissions are the responsibility of the author.
  2. The SBCS is a national sample of small businesses focused on firms’ financing and debt needs and experiences. The national report and corresponding data used for this article are available at www.fedsmallbusiness.org/survey.
  3. Note that not all differences between groups are necessarily statistically significant. Percentages may not sum to 100 because of rounding, and for some figures, respondents could select more than one option. Briefs for last year’s results are available at www.philadelphiafed.org/community-development/credit-and-capital/small-business-credit-survey-2025-insights-from-nj-pa-phil-metro-and-the-third-district-states.
  4. Note that data are weighted to be representative of all small businesses in each geography. Total sample sizes are 512 for New Jersey employer firms, 357 for Pennsylvania employer firms, 238 for Philadelphia metro employer firms, and 894 for the Third District states overall, although sizes vary by survey question. The Philadelphia metro is a U.S. Census Bureau–defined geography that includes 11 counties surrounding Philadelphia across Pennsylvania, Delaware, New Jersey, and Maryland. While responses from Delaware firms are included in the results for the Philadelphia metro and Third District states overall, the sample size of Delaware firms was too small to report separate results.
  5. Data on AI usage come from an optional end-of-survey module. Respondents were asked about their AI usage, i.e., whether the business or any employees were using AI for work based on the following definition of AI: “Artificial Intelligence (AI) refers to technology designed to perform and learn tasks that typically require human intelligence, such as decision-making and recognizing speech or images. AI tools can include stand-alone AI applications or features of software you already use.” At the time of writing, responses were only available regionally for Third District states.
  6. Responses to the “AI-related challenges” question are from the 37 percent of respondents that said their firm was already using AI. In addition to the responses featured in the figure, other responses included data security and privacy concerns (25 percent), ethical or social concerns (22 percent), cost (18 percent), or experienced no challenges (28 percent).
  7. Responses to the “reasons business does not plan to use AI” question are from the 45 percent of respondents that said their firm does not plan to use AI. In addition to the reasons featured in the figure, other reasons included finding the right tools to meet business needs (17 percent), ethical or social concerns (16 percent), cost (15 percent), data security and privacy concerns (14 percent), lack of time (12 percent), too difficult or confusing (9 percent), or other (7 percent).
  8. Age of firm, employment size, gender of owner(s), industry, and race and ethnicity of owner(s) are among the variables used to weight the SBCS. The demographic figures shown represent SBCS sample respondents weighted based on U.S. Census Bureau population data to reflect each geography.