Small Businesses Are Ready To Grow but Red Tape Keeps Getting in the Way

Most small business owners will tell you the hard part of growing is finding customers. New survey data suggests the real bottleneck is far less visible: the licensing, permitting, bonding, and compliance paperwork that stands between a business and its next move. To find out how often red tape stalls expansion, we surveyed 506 U.S. business owners about why their growth plans stall and what would get them moving.

The results point to a wide gap between businesses that are ready to grow and businesses that are cleared to grow. Owners blamed compliance uncertainty for stalled expansion far more than weak demand, most wished the process came with instructions, and a growing share now turn to AI tools before an attorney. This study looks at where that friction bites hardest and what owners say would fix it.
 

Key Takeaways

• 26% of business owners have delayed or decided against expanding into another state because they were unsure about the licensing, permitting, bonding, or compliance requirements.
• 42% of business owners say licensing, permitting, bonding, or compliance requirements, or the cost of meeting them, are the primary reason their top expansion has not moved forward, which is 4.8x more than the 9% who blame lack of customer demand.
• 40% of business owners feel operationally ready to expand but say they are not compliance-ready.
• 1 in 10 business owners (10%) say compliance complexity has prevented an expansion entirely.
• 79% of business owners wish there were a clearer roadmap for navigating licensing and bonding requirements before scaling.
• 72% of business owners say simplifying licensing, permitting, and compliance would directly accelerate their growth.
• Business owners now turn to AI tools (47%) more than attorneys (24%) or accountants (22%) to figure out what licensing they need.

How Compliance Requirements Become the Biggest Barrier to Business Expansion

Growth plans rarely die because no one wants what a business is selling. Far more often, owners said, they stall in the paperwork that comes before the launch.

Asked why their top expansion had not moved forward, 42% of owners pointed to licensing, permitting, bonding, or compliance requirements, or the cost of meeting them. Just 9% blamed weak demand, making red tape a 4.8x more common culprit than a soft market. In all, 86% had put off at least one growth move because they were unsure what the requirements involved.

The squeeze was tightest in regulated fields, where 89% had delayed a move over compliance uncertainty, but it did not stop there. Even 78% of non-regulated businesses had held back for the same reason. The sectors most likely to report a compliance-driven delay were arts and entertainment (96%), finance and insurance (93%), manufacturing (92%), technology (90%), and construction (89%).

Which move stalled depended on the industry. State expansion was a sticking point, with 26% of owners overall delaying or scrapping a move into another state due to compliance requirements. Manufacturers were most likely to shelve a new service line, at 44% versus the 28% average. And in medical and healthcare, compliance was the reason expansion stopped altogether for 57% of owners, the highest of any sector, ahead of wholesale and retail (45%) and finance and insurance (43%). 

How Uncertainty Around Licensing Slows Otherwise Expansion-Ready Businesses

Being ready to run a bigger business is not the same as being ready to prove it on paper. Many owners described a widening gap between the two, and a bill to match.

For some, the paperwork was a dead end, not just a delay. Forty percent of owners said they were operationally ready to expand but not yet confident on compliance, a gap that showed up in dollars and delays alike. 

One-tenth of owners (10%) said compliance complexity had stopped an expansion entirely, and 83% of those who had recently expanded reported some compliance-related holdup along the way. It cost real money, too: half of all owners had spent $1,000 or more on licensing, permitting, bonding, and related fees in the past year, and 15% had spent at least $5,000.

The weight fell unevenly. Owners in regulated industries were far more likely to be caught off guard by the paperwork, as 80% said the compliance work required for their expansion turned out to be more than they expected, compared with 56% of owners in non-regulated fields. Experience helped, as multi-state owners were more than twice as likely as single-state owners to feel both ready to operate and confident in compliance (46% versus 19%).

Most wanted the answers handed to them: 79% wished there were a clearer roadmap for licensing and bonding requirements before they tried to scale. Nearly half (47%) used AI tools like ChatGPT, Gemini, or Claude to make sense of licensing requirements, almost matching the 51% who used a search engine and roughly double the share who consulted an attorney (24%) or accountant (22%).

What Business Owners Say Would Make Expansion Easier

Owners were not vague about what a lighter compliance load would unlock. Asked what they would do if the paperwork got easier, most had an answer ready.

The pent-up demand was hard to miss. Nearly nine-tenths of owners (89%) said they would take a growth action if licensing and compliance were significantly easier to navigate, and 72% felt the current processes create unnecessary barriers. Just as many, 72%, said simplifying that system would directly speed up their growth.

The hardest part was not the forms or the waiting. It was knowing what applied. Determining which requirements were relevant tripped up more owners than any other stage, at 29%. Give owners that clarity, and their next move split by industry. In technology (38%) and medical and healthcare (35%), owners were most likely to add products or services first, above the 25% average. In hospitality, 36% would head for a new market or state, the highest of any sector and above the 29% overall.

Cleared To Grow

The businesses in this survey were not waiting on demand; they were waiting on a path through the paperwork. Owners blamed compliance uncertainty for stalled expansion far more than weak demand, and said they would spend, hire, and expand the moment the process got simpler. For anyone weighing a move into a new state, service line, or regulated category, the lesson is to map the licensing and bonding requirements early, before the plan stalls between ready to grow and cleared to grow.

Methodology

We surveyed 506 U.S. business owners to understand how licensing, permitting, bonding, and other compliance requirements shape decisions about growth, expansion into new states and services, and entry into regulated industries. The survey examined how often respondents have delayed or abandoned expansion plans because of compliance uncertainty, whether the paperwork turned out to be more than they expected, and which resources they now use to figure it out.

The average age of respondents was 38. The gender breakdown was 51% men, 49% women, and less than 1% non-binary. Millennials made up the largest share of respondents (56%), followed by Gen X (22%), Gen Z (19%), and baby boomers (3%). 

The industry breakdown was led by wholesale and retail (13%), followed by medical and healthcare (10%), technology (10%), finance and insurance (9%), arts, entertainment, and recreation (9%), hotel, food services, and hospitality (7%), education (6%), construction (6%), and manufacturing (5%). Industries that fell below 5% of the sample were excluded from industry-level analysis.

A total of 70% of respondents reported operating in a regulated industry that requires professional licenses or permits, and 28% reported operating in more than one state.

The survey was conducted online in July 2026.

About Lance Surety Bonds

Lance Surety Bonds works with business owners at exactly the moment this study captures: the point where a growth plan runs into a bonding requirement. We write surety bonds, such as License and Permit Bonds and Contract Bonds, in all 50 states and handle the paperwork side of getting bonded, so owners can clear one more compliance hurdle and get back to expanding.

Fair Use Statement

The findings and graphics on this page are free to share for any noncommercial use. If you publish or reference them, please attribute the work to Lance Surety Bonds with a link back to this page so your readers can review the full methodology behind the numbers.