TD Bank survey asks: Are small business owners as financially prepared as they think?
Across the U.S., at a baseline, nearly all (94%) small business owners (SBOs) believe their company is financially prepared for the next 12 to 18 months. But peel back the layers, and SBOs may not actually be as ready as they imply.
Nearly three-fourths (72%) of owners believe they can withstand revenue shortfalls for just two quarters — or less — before becoming concerned about the future of their business — and 43% of owners said their business would not survive if they fell short on revenue for three to four quarters. This is according to TD Bank's inaugural Financial Preparedness Survey: Small Businesses Owners' Report, which surveyed U.S. small business owners' current confidence in their financial preparedness.
"Now, more than ever, it is critical for business owners to be financially prepared," said Andy Bregenzer, co-head of U.S. Commercial Banking at TD Bank. "Business owners who invest the time to create a financial plan will be better positioned to face challenges and seize new opportunities. Financial preparedness is not just about business survival but also about positioning your business to grow with confidence no matter what the future holds."
SBOs: Don't get ready, stay ready
Luckily, financial preparedness is top of mind for SBOs, with nearly all respondents (99%) assessing their financial preparedness quarterly or more frequently. Cash flow is key, with more than half (52%) saying a positive cash flow is an indicator of financial preparedness, while 37% believe it's having enough capital to weather emergencies.
To support their financial preparedness goals over the next year and a half, a vast majority (82%) of SBOs indicate that they are likely to consider applying for a loan or line of credit. The top goals for this loan or line of credit include maintaining company operations (38%), undertaking a significant financial technology upgrade or overhaul (33%), expanding into new market verticals (33%) and making payroll (32%). The majority (87%) are confident their applications will be approved.
Ask the experts
To support their financial goals, owners acknowledge the importance of financial guidance and are seeking financial advice on best practices for running their business. However, less than half (46%) are turning to a banking or financial partner. 45% of SBOs are consulting other small business owners and another 30% are utilizing generative AI tools like ChatGPT.
'Small business owners don't have to face challenges alone. Bankers are true small business experts — we've seen it all, and we know how to help. SBOs who are going at it alone are leaving good advice — and potential opportunities — on the table,' said Bregenzer.
What's the currency of business? Trust.
Trusted financial partners, like TD Bank, can offer guidance as small businesses navigate shifting economies. This includes education on financial resources and types of funding, like access to SBA loans, asset-based lending and flexible lines of credit, to support both longer-term purchases and day-to-day operations. In times of uncertainty and frequent change, access to lines of credit enables business owners to respond swiftly.
One such client is the attorney and real estate developer duo of Eric Jenkins and Earle Horton, who envisioned turning a historic building on Washington, D.C.'s former Walter Reed Army Medical Center campus into a neighborhood hardware store, café and offices. This ambitious project to create Hazel's Hardware and café required an innovative blend of New Markets Tax Credits (NMTC) with a U.S. Small Business Administration (SBA) construction-to-permanent loan — a combination most banks couldn't structure.
'TD's ability to coordinate multiple funding sources made the complex project feasible. There were half a dozen times when TD could have walked away from this deal, but they didn't,' said Jenkins. 'Unlike other banks, TD stood out as having the resources to provide the solutions we needed. They had a super-strong SBA team plus a super-strong New Markets Tax Credit team, which was exactly what we needed.'
Beyond financial offerings, banking partners also serve as a key knowledge source. By understanding the structure of small businesses and their ongoing business relationships, banking partners help owners identify opportunities for growth and capitalize on them quickly.
'Despite continued concerns about economic pressures, interest rates and inflation, small business owners prove time and time again that they're a resilient group — SBOs are optimistic about their success, they work hard for it, and they deserve a trusted banker who will navigate uncertainty alongside them,' said Bregenzer.
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