Fundbox U.S. Small Business Trends Survey 2022

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New Survey: Nearly 40% of Small Businesses Would Close by October if Cash Flow Dried Up Today

The early stages of the pandemic were a hive of activity for small businesses, with a striking 53% jump in applications to start new companies. Now macro economic factors, from inflation to staffing shortages, are posing significant challenges to the small business economy.

A new survey from Fundbox found that nearly 40% of small businesses would have to close their doors within two months if cash flow dried up today. The survey of 1,520 small business decision makers also signals an opportunity for continued digitization across this vital sector of the U.S. economy, with respondents indicating interest in technology investment to drive growth.

Faced With Complex Challenges, Confidence in the Future

As macro challenges hit home, small businesses show unexpected optimism toward the future. 

  • Inflation is a major concern for small businesses. Over two-thirds of respondents say it has already hurt their business, with many requiring additional cash flow to cover rising costs. 
  • As media begin to hail a “post-pandemic” era, 60% of small businesses say the pandemic continues to negatively impact their operations. Meanwhile, 61% have been affected by rising gas prices, and two-thirds are having difficulty hiring.
  • However, in spite of significant macro challenges, 82% of small businesses have a positive outlook on the next year (through April 2023), with 63% expecting their revenue to increase. This contradicts recent studies reporting a record low for small business sentiment.

Digitally Savvy, But Struggling With Cash Flow 

Small businesses need a steady stream of working capital to invest in the tools and technology that can future-proof their business. Currently, there’s a disconnect between plans to digitize and capital available to make it happen.

  • The majority (94%) of small businesses consider themselves at least somewhat comfortable with technology, and 9 in 10 say that integrating technology into their business is having a positive impact. 
  • But as small businesses look to further invest in technology, 74% report experiencing a cash flow issue in the past year that would hinder this kind of investment. 
  • Businesses report ongoing challenges in securing capital, supply chain delays, depleted savings and increased debt from COVID, and the rising cost of capital—a timely concern as the Fed continues to make historic interest rate increases.
  • In fact, nearly 40% of small businesses report they would need to shut their doors within two months if cash flow dried up.

Clear-Eyed About Their Options For Solving Cash Flow Challenges

When it comes to securing capital, small businesses know what they want.  

  • While small businesses continue to navigate cash flow issues, they are increasingly educated about the solutions available. 73% agree that they understand all their options for managing cash flow. 
  • However, small businesses are most familiar with options like personal savings (95%) and personal credit cards (94%) than lines of credit from banks (89%) or online providers (82%).
  • It’s clear that small businesses know what they want from capital providers. Respondents shared that they value transparency, partnership and human touch, easy access, and flexibility. 47% choose cash flow solutions based on transparency in fees, while 37% base their decision on word of mouth.

Investing in Technology, Raising Salaries to Stay Ahead 

When capital is available, small businesses are investing in tech and talent to drive growth and resiliency.

  • Following the continued trend toward digitization, when asked what they would spend a sudden influx of money on, small business decision makers put technology at the top of their list. 
  • Small businesses are already using tech to drive performance across various aspects of their business. 69% already use digital marketing, 63% use payroll software, 53% use HR software and 29% use ACH to pay bills.
  • As over half of small businesses struggle to retain employees, 33% plan to increase employee salaries—a strategy that will require significant cash flow to execute effectively.

Small business innovation has been fundamental to providing essential services during the pandemic, from delivering food and hygiene necessities, to keeping us connected to our work, healthcare and education. This survey shows that, in a continually uncertain world, financial institutions and fintech innovators can work together to create a less precarious environment for these critical businesses.

Methodology: This poll was conducted April 28, 2022-May 10, 2022 among a national sample of n=1,520 Small Business Decision Makers. Qualification for the survey was based on: 

  • Decision maker or influencer over financial decisions in their business.
  • Either has fewer than 100 employees OR has annual revenue under $5 million.
  • Business has not permanently closed; is currently open or plans to reopen.

The interviews were conducted online and the data were weighted to approximate a target sample of Small Businesses based on Census region. Results from the full survey have a margin of error of plus or minus 2.5 percentage points.

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