June 26, 2017

One Quarter of All Small Businesses Have Less Than 2 Weeks of Cash in Reserve


One Quarter of All Small Business Cash Reserves Would Last Less Than 2 Weeks

In the last year, small businesses en masse have been pushed to the brink.

Natural disasters like the deadly flooding in West Virginia or civil unrest that’s spilled into the streets often force small businesses to close their doors or, at the very least, severely hamper their ability to do business as usual.

The longer a small business goes without conducting routine business, the closer they get to shutting their doors for good. To be exact, the average small business has just 27 days of cash buffer on hand at any given time.

That’s according to data gathered by JP Morgan Chase as part of its “Cash is King: Flows, Balances, and Buffer Days” study.

The study was possible thanks to data JP Morgan Chase gathered from 470 million anonymized and aggregated transactions conducted by 597,000 small businesses from February to October 2015.

A reserve of just 27 days means most small businesses are operating on a month-to-month leash.



Further, the data reveals that about half of all small businesses have between a month and two months of cash reserve.

Only one-quarter of small businesses hold a cash reserve of more than two months and another quarter are surviving quite perilously. The study shows that 25 percent of businesses have reserves that’ll last less than 2 weeks.

A Look at the Small Business Cash Reserves Crisis

“It is well known that small businesses are a critical driver of economic growth, but the consistency of their growth is in question if they’re living month-to-month. Before today, we had an incomplete view of the health of the small business sector,” said Diana Farrell, President and CEO of the JPMorgan Chase Institute. “Our data provides a new and more complete picture of small businesses and helps advocates develop policies to support their long-term growth.”

Here are some of the key takeaways from the JP Morgan Chase data:

Though the actual amount of cash varies by industry — starkly in some cases — small businesses across the board, on average, have about equal cash outflow and inflows daily. That makes it fairly difficult to build up any sort of reserve.

It seems that the likelihood that your small business will be interrupted for an extended period of time grows more every day. Perhaps that’s cliche or presumptuous but preparing for that proverbial rainy day or rainy month, in this case, seems like a good idea.

Outside of the disaster or tumult, other events could cause your business to stay closed for a longer period of time. The worst part of an unexpected disaster is that it’s — well — unexpected.

Knowing this, it’s imperative for small business owners to prepare for times like this immediately. Since it’s difficult to save cash, any sort of windfall or even just a brisk business day should have small business owners putting some cash aside in case of trouble.

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Joshua Sophy - Assistant Editor


Joshua Sophy Joshua Sophy is the Assistant Editor for Small Business Trends and the Head of Content Partnerships. A journalist with 17 years of experience in traditional and online media, Joshua got his start in the newspaper business in Pennsylvania. His experience includes being a beat reporter covering daily news. He eventually founded his own local newspaper, the Pottsville Free Press, covering his hometown. Joshua supervises the day-to-day operations of Small Business Trends' busy editorial department including the editorial calendar and outgoing assignments.

One Reaction

  1. Aira Bongco

    I think it has something to do with the fact that small businesses usually operate on a higher risk percentage. Though it will help to prepare for what is to come through disaster management, it is still done by most small businesses.

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