Let’s take a peek into the state of small business finances in 2023—What are their concerns? How are they acquiring financing? In the United States alone, small businesses make up 99.9% of all businesses. That’s 33.2 million small business owners making a global impact. 

Seeing the state of small business finances can help you understand the external factors affecting your business and how you can better prepare for the future.

1. In 2023, small businesses have access to less capital

The Q1 2023 Small Business Index reports that 49% of small businesses are happy with their access to loans and capital–which is slightly lower than the reports in Q2 2022 (54%) and much lower than Q2 2021 at 67%. 

Capital plays a huge role in how you are able to successfully grow and scale into a thriving business. Lack of capital is the #1 reason that over one-third of business owners chose as the reason why they would have to close their business. 

Learning how to strategically acquire capital and manage your cash flow are two of the most significant things you can do to keep cash in business and keep your doors open. 

Woman working on her finances for her small business

2. Small businesses are overwhelmingly charitable

Turns out, little businesses have big hearts–especially those owned by millennials and Gen Zers.

In one survey, 93% of small businesses took some sort of charitable action in the last year. These included:

  • Encouraging employees to shop small businesses
  • Charitable donations
  • Community sponsorships and/or product/service donations for local events
  • Offering discounts to local community members like veterans or teachers

One of the beautiful things about being a small business owner is the ability to connect and impact your community. Look for opportunities to support community organizations and give back to charitable causes. This can improve job satisfaction and build a positive reputation, as well as spread a little more kindness in the world. 

3. More than half of all small business owners are concerned about inflation impacting their business

Small businesses everywhere have been impacted by rising prices and 69% of them say they will have to pass on those rising costs to customers this holiday season. This is leading some to believe that holiday shopping as a whole may be lower than years before. Prepare yourself and your business for a competitive Q4 by planning early.

4. Minority-owned businesses are growing fast

While minority-owned businesses in the US are on the rise, they still are underrepresented in comparison to their white counterparts. With the exception of Asian ownership, all other minority groups hold a disproportionate amount of small businesses in the US. 

From 2019 to 2020, there was an increase of anywhere between 5-15% of Black, Asian, American-Indian, Alaska Native, and Hispanic businesses while white-owned businesses declined by 1% in the same time period.

woman of color doing her accounting for her small business

5. 71% of small businesses run by women are profitable 

Women are making a splash in entrepreneurship. However, there is still a disparity between women-owned and men-owned businesses (80% of their businesses are profitable). There’s some good and some bad. Take a look at these stats about female small business owners: 

  • The success rate for women with crowdfunding is 69.5% while men have 61.4% success rate
  • Need capital? 57.4% of the SBA Microloan program’s loan went to women-owned/led businesses
  • Men receive an average of $5,000 more in loans
  • Female leaders ask for $33,000 less in business financing


6. 66% of small businesses significantly struggle financially.

If finances feel frustrating, you’re not alone. Managing your finances as a small business can be taxing (literally and physically). The best way to counter this is to be transparent about your finances and understand as much as you can about the costs and projections surrounding your business. 

Financial struggles can lead to business failures very quickly. Forty-two percent of small businesses fail because of a lack of demand in the market for their products. You’re stuck overproducing and no one is buying. Do your market research before you launch your business and be flexible to adjust your business plan as needed. 

7. 65% of entrepreneurs think they don’t have enough cash to launch their business

Being short on cash is a big hold-up for many entrepreneurs, but there’s some good news: one-third of small businesses started with less than $5,000. With the increased availability of remote work options, the threshold for being able to start your business can be even lower depending on your industry. Some industries that require the least amount of capital are: online retail, accounting, and even landscaping. 

Man doing accounting for his small business

8. 70% of businesses report labor as their biggest cost

As your small business grows, so do your costs. And for most small businesses one of the largest costs is hiring more employees. So this also becomes the first place that businesses look to save money when cash is tight.  

If you need to cut costs on labor, consider outsourcing internal roles to consultants or contractors, or using AI technology and software to streamline business operations. 

9. Starting a business is harder now than it was two years ago

According to NerdWallet’s Small Business Opportunity Index, a number of factors are making the startup business landscape more difficult. 

  1. Average rates on short-term loans 
  2. Hiring struggles
  3. Shortage or difficulty finding SBA loans for women, people of color, veterans, and rural businesses
  4. Rising rent costs
  5. Negative economic outlook

Overall, NerdWallet’s ranking has dropped from 100 to 78.1 in just one year. So if you feel like your business is working hard to combat these obstacles, you’re not alone. 

10. 52% of small businesses choose ROBS for financing

Over half of all small businesses use ROBS (Rollovers as business startups) as their primary source of funding. ROBS are arrangements where business founders use their retirement funds (401k, IRA, etc.) to pay for their new business startup costs.

It can be a complex transaction, carefully watched by the IRS, but you’ll be able to pull the funds tax-free. The downside is that you are putting your retirement funds at risk. 

Why the State of Small Business Finances Matter So Much

With such a large fraction of the US and global economy consisting of small business owners who both depend on and support their local communities, they can be the first indicators of the impact of macroeconomic conditions.

Understanding your small business finances can help you overcome the natural roadblocks and unexpected stumbles that entrepreneurs encounter. If you don’t have a handle on your small business finances, consider connecting with an outsourced accounting firm that can help you understand and leverage your financial data to make better business decisions.

Get confident about your bookkeeping. Book a call with our friendly bookkeeping experts for free at the link below.

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