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For many small and medium-sized businesses, the extent to which they manage is measured by cash flow. Using this criterion, a second quarter survey of homeowners indicates that businesses are generally healthy.
The study released this week by Graziadio Graziadio School of Business and Management researchers reveals that only 30% of US companies have been trying to leverage external funding in the past three months. And of the companies that did not seek funding, 54% did not want it because their cash flow was quite high.
The trend seems to continue for the rest of the year 2018, since only 29% said they expected 69% of those who did not expect to do so stated that their cash flow was pretty strong.
Of those planning to raise funds, 57% said they wanted to finance growth or expansion. And two-thirds expect to apply for business loans from banks.
Cash flow matters for a company because it finances daily operations and, if it's strong enough, can be used for hiring and expansion. If a company is seeking financing, lenders and investors want to see strong cash flow before committing funds.
The strong US economy seems to help small businesses; economists predict that the gross domestic product will have increased by four percent between April and June. Some companies may also benefit from the tax law adopted in December.
The survey, conducted in April, surveyed 1,313 companies with annual revenues of $ 100 million. The companies were part of the Dun & Bradstreet database; The company compiles corporate credit reports.
Although most businesses appear to be satisfied with their cash flow, their earnings prospects declined in the second quarter. Businesses expect an increase of 6.2% on average, but down from the 10.5% expected in the first quarter.
An index measuring access to finance for small and medium-sized enterprises declined by 4.5%, from 34.8% to 33.2%. the first quarter. A separate demand monitoring index fell by almost nine per cent from 36.4 to 33.2
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