Last week, the Federal Reserve slashed interest rates for the first time in over four years, signaling a potential uplift for stocks and Wall Street. But what does it mean for the backbone of America, our small businesses? 

A new CNBC|SurveyMonkey study fielded just before the Fed announced its first rate cut, which was anticipated — though the exact size of the cut was not — offers a glimpse into the minds of these entrepreneurs. The quarterly snapshot of Main Street businesses reveals a mixed bag of cautious optimism alongside lingering concerns about inflation and rising costs. With a divisive presidential election on the horizon, the uncertainty is palpable.

Four in ten (38%) agreed that inflation continues to be the biggest risk to their business. This is nearly three times higher than the next highest risks, consumer demand (13%) and interest rates (10%).

Nonetheless, the anticipated interest rate cuts also sparked a surge in confidence. A third (33%) of respondents believed that inflation had peaked, and overall optimism for inflation relief is the highest since the first quarter of this year. 

Three in five (62%) small business owners expected some degree of impact on the business from the recent interest rate cuts, with 22% expecting a major impact, and 41% a minor impact. These cuts are fueling action among small business owners: 40% intended to increase investments, 37% planned to expand their business, and 26% said they would stock up on inventory. Only one in five planned on increasing employee wages or benefits (20%) or hiring more employees (17%).

Kickstarted by the Fed’s recent decision, there is evident hope for stability as the economy seems poised to take a big step in a positive direction. For borrowers eager to take advantage of cheaper borrowing costs, this move could provide the boost they have been waiting for. 

Ahead of November, business leaders on both sides of the political spectrum are largely voting along party lines, with Democrats and Republicans sticking to their party choices. 

However, one interesting divide emerged in the survey. Republican small business owners preferred Joe Biden to Kamala Harris. Half of Republican small business owners (53%) favored Biden over Harris as the Democratic candidate, potentially showing a divide in how different candidates’ economic policies resonate with Main Street — or possibly an expectation that Biden would be easier for Trump to defeat in the election. 

Meanwhile, Democratic business owners overwhelmingly stand behind Harris. Nine in ten (90%) of these owners support Harris as the Democrat candidate, revealing the stark political polarization that exists in this community. 

Our study revealed a notable lack of enthusiasm for vice presidential candidates Tim Walz and JD Vance on both sides of the political aisle. 

Nearly four in ten (37%) small business owners thought that Vance would have a positive impact on their business, 13 points lower than Donald Trump (50%) but still higher than the Democratic vice presidential pick Walz (29%). Although both candidates saw majority support among small business owners from their respective parties (68% for Vance among Republican small business owners, and 67% for Walz among Democrat small business owners), presidential candidates generated stronger support within their respective parties (89% for Trump and 79% for Harris).

The CNBC|SurveyMonkey study affirms that businesses are cautiously optimistic as they continue to navigate the crosswinds of this uncertain landscape. While interest rate cuts are driving optimism and owners plan to reinvest their business in various ways, it will be imperative to continue to monitor and analyze this group as election season heats up.

— By Eric Johnson, CEO, SurveyMonkey

Small business owners are collectively breathing a sigh of relief at the Federal Reserve’s widely-anticipated decision to cut interest rates last week, and new data show owners expect to put that increased capital to work.

CNBC and SurveyMonkey’s Small Business Survey for Q3 found that owners said lower interest rates will lead them to increase investments, expand their business or increase inventory. The poll was taken September 3-9, before the Fed meeting where a rate cut was expected, among a national sample of 2,276 self-identified small business owners ages 18 and up online.

Main Street has been closely monitoring interest rates. Data from the National Federation of Independent Business, a small business lobbying group, found interest rates on short maturity loans stood at 9.5 percent in August of this year, up from 7.6 percent in January of 2023. In addition, 60 percent of owners said they were not interested in borrowing right now, due in part to high rates.

Lower rates can free up resources for owners to allocate to other areas of their business, including remaining competitive on hiring, according to Holly Wade, director of the NFIB’s Research Center.

“That would be a great benefit for them to see if they can’t be more competitive in that space on wages and benefits and ease up some of those cost pressures that they’ve been dealing with for the last three or so years,” Wade told CNBC in an interview.

Closely tied to interest rates is inflation. One in three small business owners in CNBC and SurveyMonkey’s survey believe that inflation has peaked, up 9 points from last quarter’s 24 percent reading. But two-thirds still believe it will continue to rise despite optimism for inflation relief hitting its highest level since CNBC and SurveyMonkey began asking that question, and the highest reading this year. Still, owners are cautious, as 38 percent say inflation is the biggest risk to their business, nearly three times higher than the next biggest risks, consumer demand and interest rates.

In addition, overall confidence increased in the quarterly CNBC/SurveyMonkey poll to 51 out of 100. That’s up four points from last quarter and nine points from the same quarter last year, and the first time during the Biden presidency that it has risen above 50, a “net confident” reading.