Mercator Blog

Cash Flow Concerns Cause 3 in 4 Small Businesses to Delay Routine Purchases
Date: November 13, 2017
Karen Augustine
Manager, Primary Data Services

Small businesses seem to fall through the cracks at many financial institutions, but no matter how small they are, they remain a vital segment for financial services providers. Not all large banks provide the services that small businesses need, relegating them to either enterprise accounts or consumer-oriented services, while small, community banks may not offer the technology they demand.

Small businesses fuel job creation and foster economic growth in the United States, and yet the value they contribute to the economy is often understated because individually they are “small potatoes.” Collectively, though, an estimated 28 million small businesses accounted for at least 60–80% of all U.S. jobs in 2012. Start-ups and small businesses now spur most of the job growth in the United States. According to the U.S. Small Business Administration, small businesses accounted for two-thirds of new jobs created in the decade 1993–2013 and provide nearly half of private sector employment. New and young companies are even more powerful growth engines. Continued economic growth and a bullish stock market have led many small businesses to have a confident outlook on the potential for revenue and profitability growth with improving business conditions.

Mercator Advisory Group’s 2017 Small Business Survey results show that this collectively powerful market segment has clear financial needs. Nearly all firms in this segment have business relationships with a primary financial institution to provide business debit, credit, or charge cards or checking accounts and often need to use personal cards as a supplemental credit and payment method, probably for employee use. Their financial needs are complex. Managing cash flow remains a top concern among small businesses because they are more prone than large companies to seasonal business volume fluctuations and delays in collecting on invoices, delays that affect their purchasing power. Most small businesses carry a balance on their business credit cards and are more likely to do so than consumers.

Credit lines are essential to grow their business, and small businesses need quick access to funding when needed. Yet, it is often difficult for them to obtain the credit necessary to manage the ebb and flow of business. 

Business Credit Cards and B2B Payments: More Credit, Please is the second of three reports summarizing the results of the 2017 Small Business Payments and Banking Survey.