B2B Payments

Key Areas Of SMB Finance Show Need For Improvement

The latest rundown of small business (SMB) finance research uncovers key areas for improvement: Younger small business owners are more often relying on personal credit cards for business purchases, paper remains a staple in the finance department, and, while small business loan delinquency rates overall remain stable, research showed several industries in which they rose last month. Below are some of the key statistics from the week in small business finance.

Sixty-one percent of small businesses said they use commercial credit cards, a year-over-year decrease from 2017’s 71 percent. The statistic, released from Mercator Advisory Group in its report, “Business Credit Cards and B2B Payments: Opportunity to Improve Market Penetration,” found millennial small-business owners are less likely than their older peers to use a business credit card, and more likely to use their personal card for business spend. At the same time, more than two-fifths of survey respondents agreed that cash flow management is a daily concern, while more millennials said it’s a concern compared to their older peers. Half of SMBs using a business credit card borrow on those cards; one-quarter said they regularly do so.

One-third of U.S. small businesses plan to raise financing in the next six months, according to Pepperdine University‘s Graziadio Business School and Dun & Bradstreet. Their analysis suggests that small businesses remain conservative despite economic growth, as 43 percent of SMBs with revenues under $5 million have no plans to seek external finance. More than one-fifth aren’t sure what they will do in the next six months, though. An examination of small business financing needs for the year shows a fluctuating market: Demand for financing was up 2.4 percent for Q3 compared to Q2, yet down nearly 7 percent from Q1, reports in The Washington Post said.

Thirty-two percent of small businesses decreased company head counts in September, CBIZ found in its most recent Small Business Employment Index. Overall hiring declined 2.45 percent for the month after a 2.29 percent increase in August, though researchers noted that the figures are in line with historical trends. Furthermore, ongoing challenges among business owners to find qualified talent in a tight market are likely to blame for the 48 percent of companies, surveyed by CBIZ, that said they did not make any changes to their overall staff levels. Ongoing economic growth is likely to continue putting the pressure on businesses to make key hires, while the tight labor market is also expected to push wages up, the Index said.

One-quarter of small firms record their finances on paper, Clutch found in its latest survey. That means entrepreneurs are relying on an inefficient, and insecure, method to manage finances. Moreover, 45 percent of SMBs said they don’t use an accountant or bookkeeper. Researchers concluded that small firms often lack the resources necessary to hire a dedicated accountant, leaving them to “under hire.” However, the report emphasized that there are opportunities to outsource these functions, which can be a more affordable option. Instead, though, 72 percent of SMBs have one person responsible for both HR and accounting operations.

In August, 1.4 percent of small business loans were delinquent, between 31 and 90 days past due, according to the Thomson Reuters/PayNet Small Business Delinquency Index. Half of major industries analyzed saw year-over-year increases in small business loan delinquency rates, the report found. Thomson Reuters and PayNet’s Small Business Default Index rose two basis points to 1.85 percent in August, remaining relatively stable year over year. The Small Business Lending Index found lending to SMBs remaining stable and strong for August, driven by accelerated small business investment, according to PayNet President William Phelan.

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