SMB Confidence Gets Boost From Supply Chain Resilience

A recent data book from PYMNTS Intelligence, titled “How Small Businesses Finance Survival in Uncertain Times,” sheds light on the varied and sometimes precarious financial strategies employed by SMBs across the United States.

The report offers a stark examination of the financial tactics these businesses are deploying to navigate a landscape marked by acute business uncertainty, highlighting their adaptability to changing economic conditions and tariffs. It delves into how SMBs approach financing, uncovering diverse methods dictated by their unique circumstances and economic outlook.

Compiled from a survey conducted between Feb.5 and Feb. 12, involving a sample of 560 U.S. SMBs, the study provides critical insights into the financing landscape and growth strategies of these vital economic players.

Key findings from the report include:

• Half of SMBs depend entirely on their day-to-day sales or existing bank balances to survive, underscoring the fragile financial state of a significant portion of the sector. This reliance on immediate cash stockpiles is particularly prevalent among hotels, restaurants and entertainment businesses, leaving them highly susceptible to revenue fluctuations caused by a shifting business environment.
• SMBs concerned about their viability often resort to riskier financing methods, with 27% of those “slightly or not at all likely” to survive having used personal credit cards in the last 12 months, compared to more confident businesses. While business credit cards remain the most common financing tool for SMBs with access (64%), necessity drives less conventional choices when business viability is in question. Furthermore, companies with lower annual revenues ($150,000 or less) are more likely to use personal credit cards (19%) than those with revenues of $1 million or more, which predominantly use business credit cards (39.7%).
• Access to financing is a significant driver of business confidence, with SMBs possessing both excess cash and financing access being 23% more confident in their ability to handle supply chain disruptions, such as those caused by tariffs. Conversely, many SMB owners who claim they don’t need financing actually lack access to it. High fees and interest rates also serve as substantial deterrents for those with access, especially for SMBs located in smaller cities.

Beyond these core findings, the report highlights several other critical dynamics at play within the SMB sector. It noted a distinct shift in financing philosophy based on business maturity: older SMBs (20 years or more) are more likely to employ financing strategically (53%), whereas newer businesses (under five years old) often use it out of immediate necessity (45%). Revenue performance also profoundly shapes financing options and availability; SMBs experiencing declining revenues are 4.5 times more likely to lack cash access compared to those with increasing revenues.

The study also reveals industry-specific approaches to external economic pressures like tariffs, with the retail industry most likely to replace suppliers with domestic alternatives. Hotels and restaurants are more inclined to negotiate or use alternatives, and professional services being the least likely to have a plan in response to tariffs. These varied insights underscore the complex financial ecosystem SMBs navigate in an uncertain economic climate.