Small businesses are reportedly reducing their software spending, hurting the businesses that make that software.
As CNBC reported Thursday (Nov. 16), companies such as HubSpot, Bill, Paycom and ZoomInfo have all recently cautioned investors of potential declines in revenue from the small- to medium-sized business (SMB) sector.
That’s left Wall Street uneasy, the report said, as the SMB-focused tech world is hurting, even as broad market indexes are up.
For example, CNBC said, Paycom said last month that its revenue growth for 2024 would be 10% to 12%, missing analysts’ projections of growth of more than 20%.
Days later, shares of Bill fell 25% when the company lowered its profit and revenue guidance for 2024. Chief Financial Officer John Rettig said on the earnings call that the business is “operating in an environment of increasing economic choppiness, and small businesses are under increasing pressure to adjust to the current realities.”
One of the realities facing SMBs these days is high interest rates. Data from the National Federation of Independent Business show that the average interest rate small businesses paid on short-term loans has been at 9% or higher for the last three months, compared to 6.7% in 2022 and 4.6% in August 2021.
And a recent Wall Street Journal (WSJ) survey found that more than half of small-business owners said that higher interest rates had impacted operations.
“Small businesses are generally in better financial shape than in times past when interest rates have risen sharply, but they still are financially fragile,” Mark Zandi, chief economist at Moody’s Analytics, told the WSJ.
Among the troubles facing SMBs is access to credit. PYMNTS Intelligence has shown that just 47% of SMBs generating annual revenues of $10 million or less had access to business or personal financing as of July 2023.
Meanwhile, 53% reported having “no current access to credit.” It’s a problem most acutely felt among the smallest companies, those with annual revenue of $150,000 or less.
According to “What’s Next in Credit: Why SMBs Prefer Corporate Credit Cards for Short-Term Financing ” the lack of financing varies from market to market.
“Smaller SMBs have access to multiple sources of personal and business financing,” PYMNTS wrote. “These businesses use corporate cards the most often — but just slightly more than personal credit cards. Even so, the share that have access to or use corporate cards is small, as just 28% do so. Twenty-seven percent say the same about personal credit cards. Access to corporate cards varies substantially by industry, with rates low across all market sectors.”