Small Business Checkpoint: Ending 2023 on a good note – 5 themes

Small businesses appear to be ending 2023 on a good note, and we highlight five themes to watch as we head into the new year.

Headshot of Anna Zhou

Anna Zhou

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Taylor Bowley

December 2023

Key takeaways

  • Small businesses appear to be ending 2023 in fairly good shape despite growing financial headwinds. We highlight five themes that we think are critical to the health of small businesses as we head into the new year: 1) revenue, 2) operating costs, 3) debt condition, 4) alternative credit, and 5) the sectoral variation.
  • Revenue is highly dependent on U.S. consumer spending, which has moderated since the start of the year. At the same time, operating expenses remain elevated, which is squeezing profit margins, as measured by the small business account inflow-to-outflow ratio, per Bank of America internal data.
  • The good news is balance sheet conditions remain healthy for small businesses. For example, while credit card debt is rising, the overall debt-to-net worth ratio remains low according to the Fed. And these businesses can turn to alternative lending sources as banks tighten standards. Among sectors, healthcare continues to see the fastest payment growth as demand persists.

Read our full analysis for a more in-depth look at these trends.

Small Business Checkpoint is a regular publication from Bank of America Institute. It aims to provide a real-time assessment of small business spending activities and financial well-being, leveraging the depth and breadth of Bank of America’s proprietary data. Such data is not intended to be reflective or indicative of, and should not be relied upon as, the results of operations, financial condition or performance of Bank of America.