NerdWallet Small-Business Financing Index: Businesses Are Steady Amid Worries

New index measures delinquency rates, new loan volumes and optimism among small-business owners.
Kurt Woock
By Kurt Woock 
Edited by Tina Orem

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Small-business owners are faring OK financially right now, but their worries about the future are mounting, according to a new Small-Business Financing Index from NerdWallet.

This is the first installment of the NerdWallet SMB Financing Index. It tracks and weights data from multiple sources, beginning in December 2021. Future index readings are always relative to the initial entry of 100. For example, an index reading of 110 would indicate that the index has risen by 10% since December 2021.

Tracking this data provides a consistent glimpse into the economic context in which small businesses operate. The ability to receive, deploy and repay financing is crucial to many small businesses. Changes in financing activity can signal an expansion or contraction in overall business activity.

Overall, the index has been relatively flat since the beginning of the year, suggesting that financing-related activity has held steady. After a slight dip in January, the index, which evaluates factors such as delinquency rates, new loan volumes and optimism among small-business owners about future economic conditions, rose slightly in February and March.

However, in April, the most recent entry, the index dipped to 101.9, a decrease of 0.4 percentage points from the previous month. New loans and healthy credit card repayment rates have helped nudge the index higher since January 2022, but the index’s underlying data suggests rising interest rates and deflating optimism have started to weigh on small-business owners.

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Current index dips to 101.9

The overall rise in the index since the start of 2022 indicates that small businesses may be expanding their use of financing, that they are able to pay their loans on time and that owners are preparing to spend in order to meet anticipated future demand. Small-business loan volume has risen modestly since January, though that pace slowed in April. Credit card utilization (the percentage of a card’s credit limit that a cardholder uses for purchases), another sign of expansion, has also ticked slightly higher.

However, business owners have become more pessimistic about future sales, and fewer plan to increase inventories, according to the data. Supply chain issues, inflation and geopolitical tumult have only intensified since April. If more small businesses stop seeking financing, struggle to repay loans or have a more defensive mindset toward the coming months, the index may continue to fall. And because it can take a few months for some loans to go from application to completion, a slowdown in new loan applications today might not yet appear in recorded data.

Small businesses plan for an uncertain future

It doesn’t take mental gymnastics to relate to the mindset of a small-business owner. “Small business owners worry about all the same things consumers do,” says Lori Martinek, a Los Angeles-based certified mentor with SCORE, which provides free business coaching nationwide.

Rising prices are making a dent in household budgets and small businesses alike. In addition, a slowdown in one pocket of the economy can have spillover effects in others, including small businesses, says Frank LaMonaca, a certified mentor with SCORE. Production cuts at large automakers could affect small businesses that manufacture car parts, and restaurants near hotels might struggle if business and leisure travel dries up, for example.

A nationwide slowdown in small-business activity could have a wide impact. The U.S. has about 8 million small businesses, according to the U.S. Census Bureau, and these small businesses account for about 40% of the country’s economic activity, according to the ​​U.S. Small Business Administration.

“We always used to say in banking that when you make a loan to a small business, you aren’t being repaid by them; you are being repaid by their customers,” says LaMonaca. “That’s what banks do, that’s what small businesses need to look at, too.”

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Experts say: Do these 7 things now

1. Make plans for a range of outcomes

Martinek says uncertainty is a reason to plan more, not less. Creating plans for a variety of situations, including an economic downturn, could prepare you to move quickly on whatever the future holds. “You can’t pivot if you’re not ready to act,” she says.

2. Watch the calendar

Securing financing should be the last thing to scuttle if you’re considering shifting from one plan to another. “Applying for credit is not a short process,” Martinek says. “Make sure that if you want the money tomorrow, you can get it tomorrow.”

3. Mind your cash levels

“I used to recommend six months of liquidity [for new businesses],” says LaMonaca. “Now I recommend 12 months.” The change in recommendation is in direct response to uncertainty. “If you’re in business right now, I’d say those that make it have the stronger cash flows.”

4. Reduce spending where you can

Preparing for a downturn could mean having the ability to withstand lower revenues or the capacity to take advantage of a sudden opportunity, Martinek says. To strengthen your cash position, reduce expenses. For example, delay acquisitions if you can and streamline inventory where possible.

5. Eliminate slack in business operations

Tweaking how you do business can also improve your cash position, Martinek says. If you issue invoices, for example, focus on reducing current outstanding payments and improving future payment times.

6. Keep paying your bills

“The No. 1 thing you can do is protect your credit rating so that when you do have a need in the future, that’s not going to hold you back,” says Martinek.

7. Talk to your banker before a default

Schedule a time to talk to your banker. “If you don’t have a local relationship, get one now,” says Martinek. Share your plan for weathering a possible downturn. They should be able to help troubleshoot your plan, and they might offer proactive solutions, like refinancing loans now to reduce your monthly payment. “Your local banker has a lot more flexibility to give you new terms before a default,” says LaMonaca. “After you are 30 or 90 days past due, their hands are tied. Their options to help you are greatly reduced.”


NerdWallet's SMB Financing Index combines elements of Equifax’s Small Business Lending Index and Dun & Bradstreet’s Small Business Health Index, which capture small-business loan and small-business credit card activity, and the National Federation of Independent Business’s Small Business Optimism Index, which measures owner sentiment.

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