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SMB insights: Exploring trends in cash flow and sentiment among U.S. small businesses
Last week, Ocrolus and OnDeck released the fourth edition of the Small Business Cash Flow Trend Report.
The report includes an in-depth look at small business sentiment and cash flow trends based on survey responses from 525 small businesses with working capital loans and over 2 million small business applications for working capital financing during a 15-month period.
The Q3 report highlights new trends among U.S. small businesses while reinforcing some of the findings from previous quarterly reports.
Leaning into alternate payments and lenders
Consistent with previous quarters, small businesses have continued diversifying their payment options to take advantage of faster deposits. In Q3, 62% of business owners reported accepting alternate and real-time payment methods, with retail businesses leading the charge. More than 85% of companies in this sector offer multiple payment options. According to cash flow data, rural and non-metro area businesses showed the greatest increase in alternative payments this quarter, closing the gap with large metro areas where these payments are most common.
Along with a broader range of payment options, businesses also look for alternative sources of the capital they need to thrive. Businesses continue to reduce their reliance on traditional bank loans to fulfill their need for quicker, more flexible funding. In Q3, 73% of business owners reported bypassing traditional bank loans in favor of alternative lenders. Cash flow data shows a higher percentage of businesses with existing non-bank debt (50%) than bank debt (8%).
Short-term optimism and long-term planning
In reports throughout the year, small business owners have shown unwavering optimism about their growth potential. In Q3, this trend continued, with 92% of businesses expecting moderate to significant growth over the next six months – up slightly from 91% in Q2.
In this latest report, we dove deeper into the data to find trends across both business and ownership types. Heading into the holidays, healthcare and social assistance businesses are the most optimistic, with 97% of respondents anticipating growth. However, this is not isolated to any particular sector. The manufacturing industry, for example, saw improvement despite being the least optimistic, with 86% projecting growth compared to 83% in Q2.
Regarding ownership type, 97% of immigrant-owned businesses were optimistic for growth, while veteran-owned businesses showed significantly more confidence, jumping nearly 12 percentage points between Q2 and Q3. In this group, almost 97% expect to grow in the next six months as well.
With growth expected, small business owners are also planning for the long term. Family-owned businesses represent the potential for generational wealth and financial independence, and 58% of these business owners reported plans to pass their operations on to family members.
For additional insights on the state of small business cash flow, financial health and liquidity, including regional findings across the country, read the full report here.
Book a demo to discover how Ocrolus helps small business funders better understand borrowers’ financial health.
Key takeaways:
- Small businesses in the U.S. continue to adopt alternative payment methods, with retail businesses leading the charge in offering multiple payment options.
- Small business owners continue to be overwhelmingly optimistic about their potential for growth in the coming months, with up to 97% expecting moderate to significant growth in some sectors.
- In the longer term, 58% of family-owned businesses plan to pass operations on to family members for future financial independence.