Not-So-Liquid Assets

Small-business owners say their biggest problem isn't making money -- it's coping with cash-flow troubles while they try to collect it

Cash flow is a problem for most business owners from time to time, but for small businesses, it's a frequent problem. And 30% of small-business owners say that the root of their money problems is the difficulty they have collecting money that's due them.

The second most frequently cited reason for a lack of cash is seasonal changes (23%). The third is unexpected variations in sales (15%). The fourth is weak sales (13%).

"Perhaps no business problem is so well known to small-business owners and so little known to the public, including policy-makers, as cash flow," says William Dennis, NFIB Senior Research Fellow and author of the study on how small businesses cope with too little cash. The cash-flow issues were one part of a National Small Business Poll conducted by the NFIB Education Foundation and Wells Fargo.

Other highlights from the study include the following:

-- Cash flow is a "continuing" problem for one in five small-business owners.

-- Nearly one in two suffer cash flow troubles, but less frequently than those with a continuing problem.

-- One in three "never" experience cash flow difficulties.

-- Small-business owners with a "continuing" or a "common" cash flow problem are more than twice as likely to cite "borrowing" as their most important step as are those who have an "occasional" problem.

Small-business owners use a variety of strategies to solve their cash-flow problems -- borrowing, belt-tightening, chasing late payments, or relying on personal resources. Of the poll's 750 respondents, only 10% use one measure exclusively.

"When faced with a cash flow problem, small businesses take a variety of steps to solve it," notes Rebecca Macieira-Kaufmann, Wells Fargo executive vice-president and head of small business marketing. "About 70 percent say that, when they decide to borrow, they are most likely to obtain a loan or draw down a line of credit from a commercial bank."

By Robin J. Phillips in New York