Small Business Cash Flow Trend Report
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About the Trend Report
Through an ongoing partnership, OnDeck and Ocrolus have released the tenth iteration of the Small Business Cash Flow Trend Report. OnDeck, part of Enova, is a market leader in small business lending and Ocrolus is a document AI and cash flow analytics platform for lenders. The report is based on two inputs:
- Quarterly customer survey responses from 651 small businesses with working capital loans from OnDeck across all regions. These businesses generally have fewer than 30 employees and less than $10M in revenues.
- Quarterly median cash flow data from over 3.69 million applications for working capital financing during each quarter of a 15-month period.
The Q1 2026 report offers fresh insights into the state of small businesses and highlights trends observed over the past year.
Q1 2026 Key Findings
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Point 1
Growth Expectations. Small businesses remain confident, with 93% expecting growth in the next year and 32% expecting significant growth — a survey all-time high.
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Point 2
Top Challenges. Cash flow emerged as the top concern for small business owners (31%) for the first time, surpassing inflation (29%).
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Point 3
Lender Preference. Over 76% of small businesses report bypassing traditional banks for capital, a survey all-time high.
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Point 4
2026 Planning Strategies. Access to credit was the leading factor shaping small business strategy (46%), followed by consumer spending (42%) and interest rates (35%), while external macro risks such as trade policy (14%) ranked lower in Q1 — consistent with previous quarters.
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Point 5
AI Adoption. Fifty-eight percent of small businesses report using AI, continuing the steady upward trend seen in 2025, with 89% of users reporting a positive impact on their business.
Growth Expectations
Small business confidence remains strong in Q1 2026, with 93% of owners anticipating moderate to significant growth over the next year. The percentage of businesses expecting significant growth rose to 32% — a survey all-time high.
Future Growth Expectations
| Quarter | Significant Growth | Moderate Growth | No Growth |
|---|---|---|---|
| Q1 2025 | 29.1% | 64.5% | 6.4% |
| Q2 2025 | 26.1% | 65.4% | 8.5% |
| Q3 2025 | 30.5% | 62.2% | 7.3% |
| Q4 2025 | 29.1% | 64.5% | 6.4% |
| Q1 2026 | 32.0% | 61.4% | 6.6% |
Overall optimism remains broad-based across industries, with the highest significant growth expectations reported by Professional and Technical Services (37%) and Retail (33%). This is supported by underlying performance trends seen in Ocrolus cash flow data, including year-over-year revenue growth in Professional and Technical Services (+8%), alongside stable revenue in Retail.
This optimism persists amid a rapidly evolving macro environment. The March 2026 NFIB Small Business Optimism Index eased to 95.8, dipping below the 98-point historical average, even as sector-specific performance remains resilient. A similar pattern was observed in the March 2025 Index, when optimism fell 3.3 points month-over-month to 97.4.
Results drive optimism. 68% of small businesses report that they are on track to meet or exceed 2026 projections.
Businesses are acting based on continued confidence. 38% of small businesses plan to increase headcount in the next six months.
Top Challenges
Small businesses cite cash flow pressures as their top concern in Q1 (31%), surpassing inflation (29%) for the first time. This shift underscores the critical role of working capital as businesses pursue growth. While optimism remains, constrained cash flow is limiting businesses’ ability to fund operations and invest in expansion simultaneously.
Cash flow tops inflation. For the first time, cash flow is the top concern for small businesses (31%), surpassing inflation (29%).
The top reasons to apply for capital in Q1 included covering normal business expenses (38%), increasing cash flow (36%) and supporting business expansion (32%); these needs tend to be industry-specific. Retail stands out, with inventory cited as the top reason every quarter, 43% in Q1 versus 18% across all industries. Transportation and Warehousing is another clear outlier where equipment financing remains the dominant need, cited by 35% in Q1 versus 22% overall, highlighting the sector’s ongoing reliance on capital-intensive assets.
Businesses are actively managing these pressures through a range of strategies. For the seventh consecutive quarter, the top three strategies include using a business line of credit (58%), delaying payment to themselves or family (51%) and making the minimum payment on credit cards (42%). These strategies reflect a continued reliance on short-term liquidity solutions and underscore why businesses are seeking capital. This also aligns with Ocrolus cash flow data, which shows a 99.84% revenue-to-expense ratio across industries in Q1.
Median Monthly Revenue-to-Expense Ratio by Quarter
| Quarter | Accommodation & Food Services | Construction | Manufacturing | Professional, Scientific, & Technical Services | Retail Trade | Transportation & Warehousing | Wholesale Trade | All Industries |
|---|---|---|---|---|---|---|---|---|
| Q1 2025 | 99.93% | 100.87% | 100.56% | 100.16% | 101.13% | 101.87% | 100.27% | 100.50% |
| Q2 2025 | 100.60% | 101.94% | 100.87% | 101.48% | 101.16% | 101.82% | 100.62% | 100.98% |
| Q3 2025 | 100.42% | 101.80% | 100.81% | 100.24% | 100.97% | 101.80% | 100.74% | 100.83% |
| Q4 2025 | 99.79% | 101.22% | 100.62% | 100.00% | 100.87% | 101.69% | 100.77% | 100.47% |
| Q1 2026 | 99.65% | 100.11% | 100.44% | 99.81% | 100.63% | 101.64% | 100.49% | 99.84% |
As shown in the Ocrolus chart above, revenue-to-expense ratios remain relatively stable across industries but have edged down slightly in recent quarters, indicating tightening margins. Transportation and Warehousing industries continue to demonstrate comparatively strong operating performance, while Retail and Wholesale Trade remain more stable; most others industries are operating closer to break-even. Payroll-to-revenue ratios rose to 17% in Q1 (+5% YoY), indicating growing labor cost pressure.
Lender Preference
Access to timely and flexible capital has become increasingly important.
Over 76% of small businesses report bypassing traditional banks for capital — a survey all-time high. This number highlights a continued shift, particularly in Retail, where 82% of small business owners reported bypassing traditional banks in Q1 — the highest across industries. Among businesses that initially applied with a traditional bank, many cite friction in the process. This includes being denied (44%), lengthy approval timelines (29%) and complex application requirements (33%), while 28% point to more flexible terms from non-bank providers. Together, these factors underscore a clear shift in preference, as small businesses increasingly prioritize speed, flexibility and streamlined access to funding over traditional lending channels.
Access to capital remains the bottleneck. 44% of small businesses that approached a traditional bank first were denied.
Barriers to traditional lending persist. Of those who bypassed a traditional bank:
- 47% cite paperwork as a key challenge
- 30% cite concerns about qualifying
Median Monthly Debt Inflow Volumes of Applications by Quarter
| Quarter | Non-bank Debt Inflow | Bank Debt Inflow |
|---|---|---|
| Q1 2025 | $8,440 | $5,412 |
| Q2 2025 | $8,046 | $7,431 |
| Q3 2025 | $8,151 | $7,539 |
| Q4 2025 | $8,641 | $6,747 |
| Q1 2026 | $8,824 | $6,929 |
Continued reliance on non-bank lending is evident in Ocrolus cash flow data. The median monthly loan inflows increased steadily year-over-year (+5%) and quarter-over-quarter (+2%). Traditional bank loan inflows also rose year-over-year (+28%) and quarter-over-quarter (+3%), though they remain more variable over time and continue to trail non-bank inflows.
These findings are consistent with broader market trends. According to the Federal Reserve’s 2025 Small Business Credit Survey, 48% of applicants were either denied or did not receive the full amount they requested, while the percentage of businesses applying for credit increased one percentage point from 2024 to 2025, reinforcing the growing gap between funding needs and access.
2026 Planning Strategies
Access to credit (46%), consumer spending trends (42%) and interest rates (35%) remained the top three factors shaping small business strategy in Q1 2026, each increasing from Q4. In contrast, external macro factors such as trade policy (14%) have become less central to near-term planning.
Fifty-seven percent of businesses report changes in customer behavior in Q1, down from 62% in Q4, with most citing changes in average purchase size (55%), consistent with the prior quarter (54%).
These trends reflect increasing emphasis on both access to capital and demand visibility as small businesses navigate an evolving operating environment.
AI Adoption
Small businesses continue to expand their use of AI, with 58% reporting adoption in Q1 2026 (up from 56% in Q4). This is a continuing and steady upward trend observed from 2025. Eighty-nine percent of AI users report a positive impact on their business, most often measured by gains in marketing performance (40%), employee productivity (37%) and reduced rework (37%). AI use is most concentrated in marketing (64%) and business research (43%), underscoring its role in both driving demand and improving operational efficiency.
AI is delivering measurable impact. 89% of AI users report a positive impact on their business.
A 54% majority of small business owners report using AI tools and platforms specifically to search for information, an increase from 46% in Q4 2025. Among these users, ChatGPT is the most widely used tool (90%), followed by Google Gemini (33%) and Microsoft Copilot (21%).
Methodology
OnDeck analyzed survey responses from 651 current customers, who completed the survey March 4 – 10, 2026. Please note: We have not verified this data or survey responses. It may contain errors or inaccuracies, and we make no representations or warranties as to its reliability, accuracy or applicability. Customers received an incentive for completing the survey.
Purpose
The data is designed to reflect the cash flow, financial health and liquidity of small businesses in the United States. Through tracking the unique combination of data available to Ocrolus and OnDeck, it will be possible to understand the trends affecting small businesses, the economic environment in which they operate and their access to capital.
Data
Ocrolus receives data on hundreds of thousands of small businesses each month as part of applications for credit. The data consists of transactional bank data in the form of bank statements or digital bank data feeds, generally comprising the most recent 3 – 6 months prior to the time of application. Ocrolus then uses its proprietary transaction tagging and analytical capabilities to generate a detailed set of cash flow attributes for each business, thereby facilitating a lender’s understanding of its financial health and ability to service additional debt. The report is comprised of small business loan application data from the previous 15 months. Previous period figures often change slightly as new loan applications provide retrospective data.
Filtering/Exclusions
The data is filtered to include only applicants within the 50 U.S. states. Applicant data with partial bank accounts was filtered out for the latest report as the partial data was skewing values lower, particularly for the most recent months.
Calculations
For each small business, for each calendar month, Ocrolus calculates revenue, credits, debits, expense, payroll, non-sufficient-funds transactions, proceeds from lenders, payments to lenders and the use of alternative payment methods. The full data set can be viewed for each respective report via the downloadable results.