Why SMBs Can’t Afford Cash Flow Blind Spots as Bankruptcies Hit 15-Year High

When small- to medium-sized businesses (SMBs) fail, the postmortem can often fixate on a single cause.

With corporate bankruptcies, including those for SMBs, hitting a 15-year high during 2025 according to S&P data, the reality of business failures is increasingly being viewed as the end state of a variety of compounding decisions.

With tariff turbulence and macro uncertainty around interest rates and the cost of capital, the difference between survival and shutdown often comes down to cash flow timing and visibility, not long-term viability, for SMBs operating on thin margins.

For much of the last decade, SMBs operated in a forgiving environment. Low rates extended runways and consumers spent freely. Although capital was never abundant for small firms, it was available enough to cover timing mismatches. That cushion has increasingly disappeared.

Higher borrowing costs, stickier inflation in inputs and more conservative lenders have exposed the fragility beneath SMB revenue growth and business viability. The lesson of the current bankruptcy cycle is not simply that conditions have worsened. It is that too many businesses may have been navigating without a clear, real-time picture of their cash flow.

Read also: Survival or Surrender: Will Tariffs Force Small Businesses Off the Global Stage?

Exposing the Hidden Gap Between Revenue and Liquidity

When payroll, rent, inventory and debt service all compete for the same SMB dollars, precision matters. A single delayed customer payment can cascade into vendor strain, missed covenants or emergency borrowing at punitive rates.

This puts cash visibility at a premium. The irony of today’s situation is that tools for cash visibility have never been more accessible. Cloud accounting, integrated banking feeds and predictive analytics are no longer enterprise luxuries. They are priced for SMBs and increasingly automated.

Yet adoption remains uneven. Many owners still operate with spreadsheets updated monthly, disconnected from real-time transactions. Others implement software but fail to change behavior, treating dashboards as retrospective scorecards rather than forward-looking instruments.

The problem is not technology; it is governance. Cash management requires discipline for weekly forecasts, scenario planning and explicit thresholds that trigger action. Without process, tools simply make blind spots more colorful.

At the same time, when it comes to working capital and credit access, SMBs increasingly view personal and business credit as separate but complementary financial tools. According to the PYMNTS Intelligence report “SMB Growth Monitor: Small Businesses, Big Credit Needs,” SMBs typically use business credit cards for planned purchases and personal cards for unexpected expenses.

See also: Too Many Small Businesses Now Bet Tomorrow’s Survival on Today’s Sales

Seeing the Business as It Is

Small businesses account for 99.9% of all American enterprises, yet nearly 7% of SMBs are pessimistic about their odds of survival over the next two years, according to the PYMNTS Intelligence report “Brewing Storm: Why 1 in 5 Smaller Businesses Without Financing Fear They May Not Survive Tariffs.”

Jonathan Aguilar, associate vice president of Partner Experience at Maverick Payments, told PYMNTS in December that the challenges have pushed SMBs to reassess priorities rather than chase aggressive expansion.

SMBs have “to prioritize their cost control and cash flow,” he said.

Cash flow blind spots amplify three specific risks. First is concentration risk. Many SMBs depend on a handful of customers or suppliers. When one falters, the impact is immediate and disproportionate. Second is timing risk. Mismatched inflows and outflows turn otherwise profitable operations into liquidity traps. Third is financing risk. As lenders tighten standards, access to short-term credit becomes less reliable precisely when it is most needed.

During periods of stability, these risks remain latent. During downturns, they synchronize. Bankruptcies surge not because businesses suddenly became incompetent, but because the margin for error vanished.

Effective cash forecasting, then, is not about predicting the future with certainty. It is about narrowing the range of surprise. The most resilient SMBs treat forecasts as living models, updated as assumptions change. They run scenarios not only for downside shocks, but for growth spurts that strain working capital just as severely.

History shows that downturns reshape markets. The survivors are rarely the most aggressive or the most optimistic; they are the most informed. They know, with uncomfortable clarity, how much runway they have and what levers extend it.

For all PYMNTS B2B coverage, subscribe to the daily B2B Newsletter.