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

If small businesses are the lifeblood of the economy, they may be feeling a bit anemic, at least when it comes to their finances.  There’s not enough cash in the coffers, and the avenues through which capital can be replenished are increasingly hard to navigate.

In the PYMNTS Intelligence report “Brewing Storm: Why 1 in 5 Smaller Businesses Without Financing Fear They May Not Survive Tariffs, the 560 small and mid-sized businesses (SMBs) surveyed gave a glimpse into the state of affairs: Amid macro turbulence not seen in years, and tariffs that have not been at this (threatened) level in more than a century, the data shows that just 36% had access to readily available cash, including another 8% that also had cash in the bank.

Cash Navigates Storm

Cash, and the access to it, makes a difference. Our data shows that smaller firms with access to financing and cash are 23% more likely to be very confident in their ability to navigate tariffs compared to those who do not have access to financing or cash. There’s a vicious cycle in the works, too. The lack of access to funds begets a further lack of ability to get those funds. PYMNTS Intelligence found that SMBs that do not have access to financing are 75% more likely to have no plan to help offset any additional costs from tariffs.

The fact remains, too, that without access to outside capital or savings in hand, firms must rely on the vagaries of their current operating environment — which can be volatile, to say the least. Money that comes in the door or through online channels is the only means of survival, and if revenues are uncertain, then so too is the financial status of the SMBs.

Seven percent  of firms surveyed said they might have to shutter operations in a short time frame, perhaps within the next two years.  The figure nearly doubles for those companies that have no access to financing, at 13%. Overall, 50% of companies rely solely on their daily sales or owners’ personal savings to survive.

This last measure is no bulwark against uncertainty, as individuals and households that are also contending with inflation and their own financial insecurity may have to tap savings just to get by. And as PYMNTS has reported, about two-thirds of consumers live paycheck to paycheck, which gives a nod to just how thin the margin of safety for SMBs can be.

We found that 64% of hotel, restaurant and entertainment companies’ sole financing option was cash they had in the bank.

Overall, 44% of SMBs had access to any form of financing, which indicates a sizable market for forward-thinking financial services providers — particularly when it comes to cards. In terms of the products already in use, fewer than 3 in 10, or 28%, of all SMBs have business credit cards. But those cardholders are satisfied with that form of financing. Sixty-four percent of businesses with access to any form of financing use their corporate cards to withdraw money for business operations.

“The cards offer SMBs many advantages, allowing them to access cash on a moment’s notice for generally low fees, as long as repayments are made on time,” PYMNTS wrote.