Cash Flow, Costs Two Biggest Small Business Challenges

12.21.2016
Small Business

Small business owners report that cash flow and costs are their top two challenges, and research shows that they have a harder time getting bank loans than larger businesses. Small, local banks are more likely than large banks to approve loans for small businesses.
Those are just a few of the conclusions highlighted by business mentor network SCORE, which recently gathered statistics that point out the financial difficulties and opportunities American small businesses face today.
small-business-cash-flowSmall business owners report these top challenges:

  • 22% say cash flow is their biggest challenge
  • 19% say it’s the costs of running their business
  • 13% say revenues/sales
  • 9% say credit availability

On average, small business daily income is only $7 above daily expenses. Average daily incomes include:

  • Personal services: $3 net income
  • Retail: $4 net income
  • Repair and maintenance: $6 net income
  • Professional services: $7 net income
  • Restaurants: $11 net income
  • Health care services: $21 net income

Small businesses struggle to obtain bank loans in comparison to larger companies:

  • 38% of businesses with revenue less than $5 million are approved for bank loans.
  • 70% of businesses with revenue between $5 and $100 million are approved for bank loans.

Common reasons for loan rejections include:

  • 25%: Quality of earnings and cash flow
  • 21%: Size of company
  • 19%: Insufficient operating history
  • 18%: Insufficient credit

Small banks are more likely than large banks to approve smaller companies:

  • 60% of businesses with revenue less than $100K are approved for loans from small banks, while only 33% of these businesses are approved by larger banks.
  • 69% of businesses with revenue between $100K and $1M are approved for loans from small banks, while only 49% of these businesses are approved by larger banks.
  • 88% of businesses with revenue between $1M and $10M are approved for loans from small banks, while only 72% of these businesses are approved by larger banks.

 

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