New Report: Half Of SMBs Manage Cash Flow Crunch By Not Paying Rent Or Vendors

As small- to medium-sized businesses (SMBs) struggled to manage cash flow during the pandemic, nearly half resorted to not paying suppliers and monthly bills or not paying rent or negotiating lower rent.

An upcoming survey of SMBs previewed by PYMNTS found that a combined 49.7 percent said when cash got tight, they had to not pay suppliers or monthly bills. Among the respondents, 20 percent said they only did this last year, while 30 percent either continued or started the drastic step in 2021.

See also: To See What ‘Normal’ Looks Like, Watch Main Street SMBs

A slightly lower — but still significant — 47.6 percent of SMBs told PYMNTS their budget-balancing tactics involved non-payment or a negotiated reduction in rent. Here again, about 20 percent only did this last year, while nearly 30 percent continued or started this in 2021.

The findings come in PYMNTS’ survey of over 2,400 Main Street SMBs in the U.S. between July 26 and Aug. 24. Main Street SMBs are those that operate a physical storefront on main streets and side streets.

Other SMB Cash Flow Quirks

Often, these same business owners used two other strategies to manage cash flow, where 67 percent of respondents said they had relied on personal financial assets to cover cash flow gaps and roughly 65 percent applied for a loan via the Small Business Administration’s Paycheck Protection Program (PPP).

PYMNTS found that among those who relied on their own savings and assets to stay afloat, 28.5 percent only did so in 2020, while nearly 40 percent continued or started the practice in 2021. Among those who applied for a loan, 30 percent only did so in 2020 and 34.8 percent continued or started this in 2021.

“As we can see from PYMNTS data, the PPP program has literally been a lifeline for these Main Street businesses that were able to keep the doors open and pivot their business models to meet a more digital-first customer,” said PYMNTS CEO Karen Webster.

“The data also shows what little access to other forms of credit these businesses have,” she added. “The fact that two thirds of Main Street SMBs have or continue to tap personal assets to cover cash flow gaps is visible proof that more needs to be done to provide access to working capital to preserve and grow their businesses. This is where FinTechs can and will close the gap.”

The connected economy and the digital transformation have helped SMBs in many ways during the pandemic. Access to credit may prove to be another.