The Capital Report

A look at U.S. small business credit, sales, and confidence

Small businesses fuel the American economy.

Accounting for more than 99 percent of all U.S. businesses, they contribute to nearly half of the country’s employment and GDP. And what unites small businesses, from food trucks to beauty salons, is the importance of capital to run and grow.

With the Wharton School’s Stevens Center for Innovation in Finance, we’ve analyzed small businesses’ relationship with capital—including their creditworthiness, access to funding, and sales. Every business owner can use this data to understand how their business is doing relative to others, where access to credit has been more or less available, and what other businesses foresee as challenges and opportunities in the future. This information can help small businesses make smarter decisions about where and how they might want to invest to maximize their capital.

We’ve found many interesting trends over the last year. Small businesses in America have thrived. Creditworthiness remains relatively stable, and sales per small business processed through Square have grown. However, getting access to funding to start, run, and grow a business continues to be difficult.

Despite the various economic and financial challenges that small businesses face, they remain highly confident about their outlook over the next 12 months. In fact, many expect their businesses to continue to flourish, and most will continue to seek funding to fuel that growth.

Key findings



Small business creditworthiness remains steady

with creditworthiness slightly improving from 78 in 2018 to 79 in 2019, on a scale of 0–100.



Access to funding remains challenging

Half of small businesses didn’t receive the funding they needed, and 47 percent find obtaining financing to be a difficult or frustrating process.



Sales are growing

Sales processed through Square increased 25 percent year over year in Q3 2019, and 68 percent of small businesses expect to grow over the next year.



Small business confidence is high

indexing at 56, on a scale of negative (–)100 to 100. Small businesses do have some concerns, however, including competition, cost of supplies and inventory, and taxes.


Small business creditworthiness is steady.

Cash flow is the lifeblood of a business, and access to credit is important for businesses to ensure they have positive cash flow.

Creditworthiness is a measure of a small business’s eligibility to obtain financing.

As of the end of September 2019, the Creditworthiness Index was 79. When comparing this to the Creditworthiness Index at the end of September 2018 (78), average creditworthiness among businesses that work with Square has remained relatively stable.

The Creditworthiness Index shows average creditworthiness across all small businesses that process their payments through Square. It ranges from 0 to 100, where 100 means small businesses are extremely creditworthy, and 0 means they are not creditworthy at all.

While creditworthiness has remained relatively stable, there are some types of small businesses that are more creditworthy than others.

Businesses within industries that are less prone to economic cycles—such as health and beauty and health services—are relatively more creditworthy. Those in which consumer purchases are more discretionary—such as contractors, repair, and leisure—are often less creditworthy.

Businesses in urban, suburban, and rural communities are, on average, all similarly creditworthy. However, these businesses vary in their success accessing external funding, as we’ll see later in the report.


Access to credit remains challenging.

Creditworthiness, however, doesn’t guarantee access to capital.

In our survey of 1,000 U.S. small businesses, nearly half did not get any or all of the funding they needed in the last 12 months.

Forty-seven percent of small businesses found obtaining financing to be a difficult or frustrating process. And 37 percent believe that obtaining financing does not feel accessible.

There were several reasons that small businesses were denied credit:

Because of difficulty accessing funding, more than half of small businesses used a business or personal credit card they already had to access the capital they needed.

There is more to the story when we look at these small businesses through a variety of lenses.

As a result of being underfunded, small businesses made hard tradeoffs. To accommodate their lack of funding, small businesses chose to do the following.

Small businesses are overwhelmingly optimistic about getting the funding they need next year.

The majority of small businesses are optimistic about obtaining the financing they need in the next 12 months, while only nine percent say they are concerned. This is despite the difficulty many businesses had accessing funding in 2019.

Over the next year, 63 percent of businesses said they are looking for the same amount or more financing, while 37 percent said they would seek less financing or none at all.


The state of small business sales is growing.

Sales processed through Square increased in Q3 2019 as compared to Q3 2018.

We see interesting trends when we look at average sales per business across industries and geographies.

Sales growth by industry

Sales grew across all industries during this period, with the highest average same-store growth coming from the food and beverage and health services industries. Transportation businesses showed the smallest average same–store growth per business.

Sales growth by geography

Same-store sales for small businesses in urban and suburban areas have grown faster than for businesses in rural areas over the past year. Specifically, growth in average sales per business processed through Square was eight percent higher in urban and suburban communities as compared to rural communities.

Based on our survey results, over the next year, most small businesses are confident their total sales will continue to grow, while only three percent expect their sales to decline.

Businesses within the food and beverage industry are most optimistic, with 86 percent predicting that their sales will rise. Businesses in the leisure and entertainment industry are most pessimistic, with nine percent of businesses expecting their sales to decline.

Also, businesses within urban environments are most bullish on their sales in the next 12 months, with 74 percent expecting sales to grow, versus 66 percent of businesses in rural areas and 62 percent of businesses in suburban communities.


Small business confidence is high.

Understanding how other small businesses feel about the future can aid businesses in preparing for what might come.

Businesses have high confidence in the year ahead as they look to what their future sales, expansion plans, and access to financing could be. This year’s Small Business Confidence Index—a measure of businesses’ outlook on the future of their business—is 56. The index is a score between 100 (completely confident) to –100 (not confident at all).

While small businesses on average were confident in their outlook, we did see meaningful differences.

However, 2020 has some unknowns.

While the future may seem rosy, businesses acknowledge there might be headwinds that could hinder their success.

Small businesses believe competition will be the most significant challenge over the next 12 months, followed by cost of supplies and inventory, and decline in customer spending. Only 13 percent of businesses are not expecting any significant challenges to their business.

Additionally, 36 percent of businesses believe that federal, state, and local business taxes will have a negative impact on their business in the next year, in addition to the political climate (31 percent) and tariffs and global trade (27 percent).

No matter what, small businesses will keep going.

Time will tell if any of the challenges above actually create roadblocks for small businesses over the next year. However, we know one thing is certain—in the face of obstacles, small businesses work harder, remain resilient, and find a way to make it work. That is apparent from the overwhelming confidence small businesses have about the future, even in light of these challenges. We will keep track of any changes to small business credit and sales, and share what we learn in our next Capital Report.


The information presented in the Capital Report is derived from data on millions of U.S. businesses that work with Square, as well as survey responses collected from over 1,000 small businesses across the U.S. through independent third-party research firm The Harris Poll in October 2019.

About the researchers

At the Stevens Center for Innovation in Finance, a teaching and research center at the Wharton School at the University of Pennsylvania, faculty and students evaluate macro- and micro-economic trends to develop key insights about the economy and business. Together, Square Capital and the Stevens Center have a finger on the pulse of small businesses in America. And we believe all business owners should have access to this data, so they can make informed decisions about how to run and grow. That’s why we created the Capital Report.


Professor David Musto, Ronald O. Perelman Professor in Finance and Faculty Director
Jacob Effron, MBA candidate
Christina Huang, MBA candidate
Natalie Raps, MBA candidate
Meghna Sreenivasan, MBA candidate
Li Wei, MBA candidate


© Square, the Square logo, Square Capital, and others are trademarks of Square, Inc. and/or Square Capital, LLC. Square Capital, LLC is a wholly owned subsidiary of Square, Inc., d/b/a Square Capital of California, LLC in FL, GA, MT, and NY. All loans through Square Capital are issued by Celtic Bank, a Utah-Chartered Industrial Bank. Member FDIC, located in Salt Lake City, UT. Loans are subject to credit approval. Visit here for more information.