Canva Even as the COVID-19 pandemic receded in 2022, a cocktail of tricky economic conditions created a tough market for small businesses. This particular year saw some of the highest and most sustained inflation on record–peaking at 9.1% in June 2022–affecting consumers and businesses alike. Interest rate hikes, crypto crashes, and the global economic impact of Russia’s invasion of Ukraine only added to the challenging conditions. Small business owners had no choice but to adapt in order to weather the storm. To find out how they’re coping, Credibly used the 2022 Small Business Credit Survey from the Federal Reserve to discover the top actions small businesses are taking in response to financial challenges. The analysis does not include businesses with no employees. The Federal Reserve survey collected responses from over 7,000 businesses on actions they took over the course of 2022. According to the responses, just 6% of employer firms said they didn’t face any financial challenges over the past year. Of the majority that did face financial challenges, about 95% took some type of action to mitigate them. Keep reading to learn more about the top steps small businesses took to respond to these challenging economic conditions. #7. Obtained grants/gifts Canva – About 18% of small businesses employers with financial challenges took this action The least popular way small businesses dealt with recent economic challenges was by obtaining grants or gifts. While some agencies like the Small Business Administration, the Department of Commerce’s Minority Business Development Agency, and other federal agencies offer grants for small businesses, they’re typically targeted at specific industries or types of companies. Some state and local agencies also provide grants, though the amount available to small businesses varies from region to region. Additionally, many pandemic-era funding programs ended in 2022, removing another financing option for business owners. Past years of the Federal Reserve survey found greater numbers of small businesses sought out pandemic-related assistance–91% and 77% in 2020 and 2021, respectively. However, that need did decrease in 2022 as the pandemic gradually receded, with only 34% of firms applying for pandemic-related financial assistance, according to the survey results. #6. Made a late payment or didn’t pay Canva – About 23% of small businesses employers with financial challenges took this action According to one survey, 59% of small businesses say they’ve been on the receiving end of late payments. This in turn can make it difficult for the business to pay its own bills on time–or at all. In fact, as many as a third of small businesses in the U.S. said they’re at risk of closure due to late payments. The consequences can be equally dire for missing a payment or making a late payment on a business loan. Not only will they likely start accruing late fees, but the loan could enter into default–possibly triggering a clause that requires the borrower to pay back the entirety of the loan. This could lead to a seizure of business assets and even the owner’s personal assets, as well as hurting their credit score. #5. Cut staff, hours, and/or downsized operations
How small businesses are responding to financial challenges
