Small business resilience: Insights from our latest cash flow trend report

As the small business landscape evolves, we’re excited to release the second iteration of our Small Business Cash Flow Trend Report covering Q1 2024.

In partnership with OnDeck Capital, the leading small business lending company at Enova, our latest quarterly survey features responses from 422 small businesses with OnDeck working capital loans and cash flow data from more than 1.9 million small business applications for working capital financing.

This latest edition reveals new insights regarding the health of small businesses and continues many trends seen in our Q4 2023 report.

Small business owners’ optimism continues

Continuing a trend in previous findings, most small business owners remain optimistic about their growth and expansion capabilities over the next 12 months, with optimism increasing slightly from Q4 2023. Immigrant-owned and minority-owned businesses are particularly confident about their growth prospects.

On a regional level, business owners in Dallas and Boston are the most optimistic in the country, with 48% and 41% expecting significant growth, respectively. This widespread optimism among diverse business communities highlights the resilience and adaptability of small businesses nationwide.

Decreasing revenue, but healthier revenue-to-expense ratios

While owners maintain their optimism, median small business revenue decreased from Q4 to Q1, marking a 1.9% decline YoY for the same period. At the same time, payroll as a percentage of revenue continues to be high, reaching 19.5% in Q1 2024, up from 18.5% in Q1 2023.

However, decreasing expenses have offset this, leading to a slightly higher revenue-to-expense ratio over the quarter.

Additionally, small businesses are making greater use of payment apps for transactions and employing strategic measures to manage cash flow during financially tight periods. Over half of the small business owners use a business line of credit. Many also choose to delay payments to themselves and their family members, ensuring operational expenses are met first.

Overcoming challenges with traditional underwriting

In an environment that demands quick solutions for unexpected financial challenges and new opportunities, it’s not surprising small businesses greatly value the speed, simplicity, and flexible terms offered by alternative lenders.

Over a third of small businesses who applied for a loan from a bank found traditional bank application processes difficult, and a similar portion cited the long wait as a reason for seeking a different funding option. Businesses also faced relatively high rejection rates from traditional financial institutions, regardless of their longevity. Approximately 40% of the companies that have been in operation for over 20 years were denied a loan from a bank.

Incorporating cash flow data from various documents helps lenders gain additional context that complements credit bureau insights and enables them to make quicker, better-informed decisions, helping small businesses access capital faster.

With 92% of family-owned small businesses being first-generation and 58% planning to pass their operations down to the next generation, investing in small businesses goes beyond supporting profits—it contributes to a family legacy. With a complete picture of financial health, lenders can make more informed decisions to support small businesses’ success.

Book your demo to discover how Ocrolus enables small business lenders to better understand their customers with cash flow analytics.

Key takeaways:

• Small business owners remain optimistic about growth, especially in immigrant and minority communities, showcasing the resilience and adaptability of small businesses across the U.S.
• Despite declining revenues, small businesses have overcome financial struggles by optimizing expense management and utilizing credit lines to sustain healthier financial portfolios.
• Alternative lending solutions and enhanced cash flow analytics are critical in defeating the limitations of traditional credit assessments, enabling quicker and more informed lending decisions for small businesses.