Cash-Strapped Main Street Merchants See Credit Options Shrinking

Many Main Street small businesses are operating on the brink without adequate capital to survive a downturn, making access to finance a critical consideration in 2023.

This is analyzed in the study Main Street Health Q1 2023, a PYMNTS and Enigma collaboration, based on survey responses from more than 500 SMBs with brick-and-mortar shops.

Findings include that businesses on Main Streets across the country “are operating on the edge” as only 26% have access to the equivalent of at least 60 days’ worth of revenue, and 17% have no ready access to emergency funding. With inflation looming over each business day and every transaction, new sources of funding are crucial to keeping SMBs viable.

Looking at the findings about sources of capital SMBs rely upon, the study states that “business credit cards are the most common financing option that Main Street SMB owners have for contingencies, with 40% saying they can finance their companies with business cards in case of a cash flow shortage. Meanwhile, the share of companies turning to business loans from online lenders, working capital loans from banks and unsecured business loans is up 24%, on average, compared to last year.”

The findings suggest that access to alternative financing options is absent, 55% of Main Street SMB owners would need to tap personal assets to keep doors open and the lights on.

“Personal credit cards are the second-most common source of capital that SMB owners say they have readily available in case of an emergency,” per the study, “with 31% saying they would use their personal credit cards in the event of a cash flow shortage. We found that 22% of Main Street SMB owners would tap into their personal investment assets, and 18% would apply for a personal loan to stay open.”

Among the organizations surveyed, 18% are in construction or utilities, 17% are in retail, 11% are in professional services, 10% are in personal and consumer services and 9% are in food, entertainment, and accommodations. This shows the widespread need among types of diverse businesses to be able to access new sources of working capital in the current economy.

Get Your Copy: Main Street Health Q1 2023