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About the Biz2Credit Inflation Impact on US Small Business Study

In the first study of its kind on inflation’s impact on small businesses, Biz2Credit, a leading online funding provider to small businesses, analyzed revenues, expenditures and other economic features of US small businesses. The analysis is based upon anonymized, user-permissioned transactional cash flow data from 140,000+ US small businesses on the Biz2Credit funding platform, comprising nearly 105 million cash inflow and cash outflow transactions between January 2019 to October 2022.

Executive Summary

The economic behavior of small businesses in the post-vaccine recovery and inflationary phase was very different from the earlier Covid pre-vaccine phase. In the pre-vaccination phase (2020-Q1 and 2020-Q3), small businesses conducted severe cost-cutting in the face of falling revenue, with both dollars per expenditure transaction and the number of transactions falling by 14% and 8% respectively.​

By contrast, in the post-vaccination recovery (2022-Q1 and 2022-Q3) during high inflation, small business encountered severe pressures to manage cash flow while trying to maintain business activity at higher post-vaccine recovery levels. As a result, while dollars per expenditure transaction fell 12%, the number of transactions rose by 9% to maintain business activity in the recovery phase and offsetting the fall in cash outflow per transaction.

The study next analyzes how inflation impacted small business behavior due to energy prices (gasoline and utility rates) that increased rapidly in 2022. For gasoline, the study analyzes the impact on the Transportation and Warehousing industry, for whom this is an essential input. The average volume of gas consumption fell when prices rose in 2022-Q2, then rose slightly when gas prices fell in 2022-Q3. As transportation firms need to fill customer orders in any event, they have limited flexibility in adjusting volume in response to price changes.

A similar analysis was done for utility spending by the Accommodation and Food Services (AFS) industry, where average utility spending was highest. The utility price index from the US Energy Information Administration (EIA) indicated that energy prices rose sharply in 2022-Q2 from the prior quarter and continued to do so in Q3. The observed reduction in volume due to higher utility prices in 2022-Q2 was much greater than with gasoline, indicating that small businesses had greater leeway in cutting utility volume when prices rose. However, as utility prices continue to rise in Q3, the reduction in volume was much less, suggesting that the businesses were reaching their limits in cutting utility consumption.

Key Findings: Summary

Business Performance Measures

Small businesses saw a post-vaccine economic recovery from 2021-Q2 as their revenues grew This was also a time of higher inflation that accelerated in 2022-Q2, before moderating in 2022-Q3

Business Performance Measures

During first wave of pandemic in 2020, small business dollars per expenditure transition fell by 14% and number of transactions by 8%.​

Business Performance Measures

In 2022, small businesses reduced dollars per transaction by 12% to preserve cash flows but increased number of transactions by 9% to maintain activity at recovery levels

Business Performance Measures

As gas prices spiked in 2022-Q2, gasoline consumption fell for Transportation companies. However, price change had only a small impact on volume as such firms had to meet customer orders.

Business Performance Measures

By contrast, as utility prices rose is 2022-Q2, businesses cut volume more significantly compared to gasoline As utility prices continued to rise in Q3, businesses were reaching their limit to cut volume further.

gqb-1 The analysis is based upon anonymized, user-permissioned transactional cash flow data comprising nearly 105 million cash inflow and cash outflow transactions from U.S. small businesses on Biz2Credit’s online marketplace. Unfortunately, the spike in prices came just as the U.S. economy was recovering from the initial waves of the COVID pandemic and created an entirely new set of challenges for small businesses. Many of them are still hurting. gqb-2

Insight from Biz2Credit CEO, Rohit Arora

Small Business Revenue,Expenditure, And Producer Price Index (Ppi)

  • The PPI* rose steadily in phase (c) with economic recovery since 2021-Q2, extending to 2022. It has two sub-periods: in c.1, small business revenue and expenditure grew. The PPI accelerated in c.2, starting in 2022-Q2 after which the PPI stabilized as supply constraints eased and interest rates rose.

  • While revenue and expenditure grew faster than the PPI in c.1, this changed in c.2 as small business revenue growth slowed in 2022-Q2.

  • Finally in 2022-Q3, as inflation eased, small businesses were able to cut expenditure, although small business revenues remained flat.

Figure 1a shows (a) the Pre-Covid phase up to 2020-Q1 (b) the Covid Pre-vaccine phase prior to mass vaccination from January 2021. There was large cost cutting as small business revenue fell sharply (c) the Post-vaccine Recovery and Inflation phase as small business revenues gradually recovered. This phase consists of two sub-periods c.1 and c.2, as noted above.

Producer Price Index
The chart shows Quarter over Quarter percentage change in PPI, small business revenue and expenditure.
Source: Biz2Credit Data,; Biz2X Analysis
*Producer Price Index measures inflation from the perspective of costs to the industry or producer of products. Increase of PPI usually means inflation is on the way.

gqb-1 The rise in goods price has impacted us and is continuing to impact us. It is hard to raise our prices. It is mac and cheese. Yes, it is fresh cheese and fresh ingredients every day. But there is only so much you sell a plate for. So, we must find other ways of tightening things up. We are looking at our bottom lines. How can we still sell our food at a modest price point when our cost of goods is going through the roof right now? gqb-2

Insight From Sarita Ekya, From S’mac

Impacts Of Gasoline And Utility Inflation

  • This study focuses on the impact of high inflation in industries and sub-industries most likely to be affected. For gasoline, this is the Transportation and Warehousing industry (Figure 3a). For utility spend, this is Accommodation and Food Services (Figure 3b).

  • As shown in Figure 3a, gasoline spend for the middle 50% of Transportation small businesses in the Biz2X sample ranged between $154 to $1810 per month, with some firms in the industry averaging nearly $4300 per month. This is far greater than ranges of all industries ($83 to $337).

  • Figure 3b shows the difference between Accommodation and Food Services and all industries for utility spend. For the former, it ranged between $200 to $504 (middle 50% of firms in the industry) compared to the range of $160 to $392 for all industries.

Impacts Of Gasoline And Utility Inflation Impacts Of Gasoline And Utility Inflation

Note: Data is for 2022 Q3. The box for each industry show the range of average monthly spend of the middle 50% of firms in the industry. The thin lines extending from either side of the box show the 10th percentile and 90th percentile of average monthly spend. The same applies for all industries.

gqb-1 Inflation is the biggest challenge facing America’s small businesses in 2023, and Biz2Credit’s research shows the impact it is having on small business. Entrepreneurs are struggling to prioritize costs and manage cash flow. Inflation reflects rising fuel costs that affect all small business sectors, rising food costs that hurt restaurants, and rising employee costs that are part of the current difficult labor market.

With the current volatile economy, we encourage all small businesses to visit their local Small Business Development Center (SBDC) for guidance on creating a manageable path forward. With nearly 1,000 centers nationwide, every small business can get the help and support they need.

Insight from charles “Tee” Rowe,
President & CEO of America SBDC (Small Business Development Center)

Implications For Small Businesses In 2023

  • Inflation during the post-vaccination recovery period led to significant changes in small business activity. This was especially seen when inflation accelerated in 2022. In 2023, there is considerable uncertainty about the prospect for continued inflation, further interest rate hikes, weaker economic growth or spikes in gasoline prices. The inflation study offers valuable insights for small businesses in such circumstances.

  • With continued macroeconomic uncertainty around inflation, growth and interest rates, small businesses need to be exceptionally cautious about cash flow management. This involves careful timing of cash outflows to match projected cash inflows. Small businesses accomplished this in 2022 by spending less on each expenditure transaction, while increasing the number of transactions to preserve overall activity levels.

  • On the revenue side, small businesses need to gauge their ability to pass on cost increases to their customers (what is known as pricing power) without excessively hurting demand. Such pricing power is likely to be diminished as consumers also confront inflation, so ongoing revenue management will be critical.

  • Small businesses need to assess whether their operations require additional financing to manage cash flows and whether their projected cash flows can support such borrowing. A disciplined historical track record showing prudent cash flow management can be very helpful in obtaining such financing from banks and online marketplaces, should they choose to apply for it.

gqb-1 The continuing inflationary environment underscores the need for careful cash flow management in both expenditures and revenues. Cash outflows need to be well-timed to match cash inflows from customer revenues. Small businesses accomplished this in 2022 by decreasing the average amount of each expenditure transaction while increasing the number of such transactions to preserve overall activity levels. gqb-2

Insight from Biz2Credit CEO, Rohit Arora

About Biz2Credit

Founded in 2007, Biz2Credit has arranged more than $7 billion in small business financing. The company is expanding its industry-leading technology in custom digital platform solutions for banks and other financial institutions, investors, and service providers. Visit or
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