Small Dollars, Big Impact: How Entrepreneurs Keep Cash Flowing

Key Findings

• More than one in three small businesses sought funding in 2024, often to bridge cash flow gaps rather than to grow.

• Half of small business owners who contributed personal assets put in $10,000 or less, compared to just 15 percent of those who secured external financing. High borrowing costs could be driving some of these business owners to use their own savings to support their businesses.

• Four in five businesses started in 2024 used either personal or external financing, with more than half relying on personal contributions. New businesses seek financing while they’re establishing their market and building a customer base.

• New businesses primarily used financing to cover short-term needs like payroll or one-time costs like property expenses. Businesses face highly volatile cash flows, and this is especially true when they are new. Small dollar financing can help them meet near and medium term expenses.

Introduction

Small businesses don’t always need big loans or splashy investments. More often, they need modest amounts of financing to smooth out the ups and downs of running a business—especially when customer payments lag or unexpected expenses pop up.

At Gusto, we regularly survey small businesses about their experiences. We built this report using our 2024 State of Small Business Survey and 2025 New Business Formation Survey to understand the financing needs and experiences of existing businesses and businesses started in 2024. We find that many entrepreneurs lean on a mix of personal funds, credit cards, and external financing to fill these short-term gaps. These tools help businesses manage day-to-day needs, but they can also put personal finances at risk if better options aren’t available.

More than 1-in-3 small businesses sought funding for their businesses in 2024

More than a third of small businesses sought funding in 2024, not just to grow, but to meet their regular cash flow needs. Entrepreneurs often need financing to bridge cash flow gaps, especially when bills come due before customers pay. About one-quarter turned to external lenders like banks, fintechs, or personal networks. Even more relied on personal assets, with 34 percent supporting their business this way.

Four-in-ten businesses that use financing use a credit card

Whether using external financing or personal funds, many small business owners rely on credit cards. They’re convenient, offer immediate access to cash, and often come with a built-in grace period of up to 50 days before payment is due. That can make credit cards a useful tool for bridging short-term gaps between expenses and revenue.

But for longer-term needs or ongoing cash flow volatility, credit cards can carry steep fees and high interest rates. In those cases, small businesses may need to look for other financing options, especially for small-dollar loans.

Half of small business owners who contributed personal assets to their business contributed less than $10,000, compared to only 15% of businesses that received external financing

Small businesses needing $10,000 or less were much more likely to rely on their owners’ personal assets than to seek external financing. Sometimes this reflects personal choice. After all, external financing can be expensive and time-consuming, and some owners may prefer to use personal funds and pay themselves back later.

But it may also reflect a gap in small business lending, especially for lower amounts. Banks and other traditional lenders face high costs to evaluate and underwrite loans, making them less willing to offer smaller amounts. That could help explain why 41 percent of businesses in our 2024 survey said they were unable to secure all the funding they needed to launch.

When credit isn’t available, business owners often fill the gap themselves. Nearly 70 percent of those who contributed personal funds sold personal property to come up with the money. About 30 percent tapped personal lines of credit or home equity. Better access to small, short-term loans could help businesses meet their needs without risking personal finances.

More than half of new businesses used personal contributions to start in 2024

Four out of five people who started a small business in 2024 needed financing beyond their regular revenues to get started. That isn’t surprising. Most small businesses need time to build a customer base, and steady customers bring steady cash flow.

What stands out is that more than half (53%) used personal contributions from the owner. Among those, 85 percent tapped their savings or investment accounts, and nearly one in three used personal credit cards. All of these provide quick liquidity for businesses looking to ramp up, but they may limit an owner’s flexibility to manage personal expenses when unexpected costs arise.

Starting a business didn’t always take a large amount of money. Nearly 40 percent of new businesses needed $10,000 or less. About a quarter needed between $10,000 and $50,000 to grow.

New small businesses in 2024 primarily used financing to support short-term or one-time costs

We often think of small business financing as a way to fund long-term investments—like buying equipment or expanding capacity—that will help a business grow. But that wasn’t the case for most businesses that started in 2024. Only 15 percent borrowed money for these kinds of long-term needs.

Instead, many borrowed smaller amounts to manage irregular or unpredictable cash flow. Nearly 40 percent used financing to cover payroll. That’s not a sign of trouble. It’s a reflection of how business works: employees often need to be paid before customers settle their invoices. For businesses with tight margins, short-term financing helps bridge that gap.

Covering short term costs wasn’t limited to just payroll. More than 40 percent of new businesses that needed financing used it to cover one-time property expenses, like security deposits, remodeling costs, or real estate closing costs.

Conclusion

Small businesses are resourceful, but they shouldn’t have to stretch personal savings or rely on high-cost credit to make ends meet. Our data suggests that better access to small-dollar, short-term financing could give entrepreneurs the flexibility they need to manage cash flow without putting their personal finances on the line.

As lenders, policymakers, and service providers look for ways to support small businesses, meeting these everyday financing needs may be just as important as funding the next big expansion.

Methodology

This report uses data from two Gusto Surveys: the 2024 State of Small Business Survey and the 2025 New Business Formation Survey.

The 2024 State of Small Business Survey is a survey of over 1,300 respondents conducted by Gusto between August 6 and August 31, 2024. Survey participants were recruited from the universe of Gusto customers who have owned their business since at least July 31, 2023. Survey results were weighted using the national distribution of 2-digit NAICS sector and firm age from the 2022 Annual Business Survey.

The 2025 New Business Formation Survey is a survey of 1,011 new-business owners using Gusto’s platform. The businesses were identified as having joined Gusto as a new business in 2024, and respondents were solicited across individuals who were identified to be the “Owner” or “Founder” of the business. Respondents confirmed at the beginning of the survey that their businesses were created in 2024. Respondents were asked to complete the survey via email from February 3 to February 21, 2025. Reported responses were weighted to match the industry distribution across the universe of businesses created in 2024 based on the Census Bureau’s Business Formation Statistics.