Despite the moniker attached to their segment, small businesses loom large in the American economy.
And in celebration of the US Small Business Administration (SBA). National Small Business Week starting Sunday (April 28), the enduring power of US entrepreneurship is at the fore for both small to medium-sized businesses (SMBs) and the solution providers and financial institutions that serve them.
“Small businesses are the engine of our economy and the heart and soul of our communities. They employ nearly half of all private sector workers and contribute to every industry. Providing them with what they need to grow is one of the best investments our country can make,” the White House said on Friday (April 26). statement.
After all, small and medium-sized enterprises, which may employ only a handful or a few dozen people, instead of the thousands of employees boasted by larger corporations and enterprises, makeup 40% of the US economy and represent 99.9% of all US businesses.
But this key business segment faces a myriad of challenges that range from economic uncertainty to regulatory burdens to access to capital and managing the growing imperative for digital transformation.
That’s why, as National Small Business Week approaches, PYMNTS examines the state of the small and medium business landscape.
Read also: Young SMEs cannot find enough business financing
Ensuring access to capital for small businesses
Securing financing to start or expand a business can be difficult, especially for those without established credit or collateral. And while small businesses are the lifeblood of local economies, they often find themselves out struggling to provide the capital they have to invest in their growth.
As noted in the White House announcement, “mom-and-pop businesses with a handful of employees often need small loans of $100,000 or less, but not all banks offer them.”
“Signing small businesses it’s not simple,” Ryan Rosetteco-founder and CEO of Credibly, told PYMNTS, explaining that while access to working capital is “imperative” for small businesses, there is a gap in the market for alternative lenders to fill.
PYMNTS Intelligence has calculated only about 8.5% of SMEs said they found working capital loans from banks readily available. More than half of those surveyed said they would consider raising new funding in 2024. Of the companies considering new financing, the data shows that more than 26% would consider using an online lender; about a third would use a large national bank.
Without access to financing, small businesses can struggle with both day-to-day operational realities and future-proofing investments, making it challenging to enter new markets and compete with larger competitors.
Navigating complex federal, state and local regulations can also be a daunting and time-consuming exercise, especially for small businesses with limited resources.
Financial institutions have a a unique opportunity to strengthen the resilience of small businesses by providing tailored financial instruments and support, NCR Voyix Chief Product Officer, Digital Banking Doug Brown said in the new PYMNTS e-book, “The consequences of uncertainty.”
In addition to basic banking services, banks and credit unions may offer advanced functionality such as cash flow management, payroll capabilities, expense tracking, and more. By integrating these features into their services, banking providers can empower small business owners to streamline their financial operations and make more informed decisions, Brown said.
Read also: Open banking enables small and medium-sized businesses to use more data for financial decisions
Investing in digital transformation has a big impact on small businesses
S costs of doing business only increases in price for Small and medium-sized businesses on the high streetinnovation and adaptability are becoming increasingly important to remain competitive—and move from a reactive to a proactive stance.
“We went through one of the most volatile macro environments … and I think a lot [SMBs] now they are beginning to think of an offensive,” Charles Juvice president of product at Enigmatold PYMNTS in an interview published in December.
By using technology to streamline and modernize legacy processes, small businesses can improve efficiency, reduce manual errors, and improve their growth prospects.
Digital investments are particularly important given the latter PYMNTS Intelligence it reveals that consumers have come to expect seamless digital convenience, but many are finding that smaller merchants are not meeting their expectations.
“Global Digital Shopping Index 2024: SMB Edition”, a PYMNTS Intelligence study commissioned by Visa acceptance decisionsrevealed that in the United States, “users are missing out on 55% of desired features” in SMBs.
