Every year the Federal Reserve Banks survey thousands of small businesses about their finances. The latest edition, the 2026 Report on Employer Firms, is based on 6,525 responses collected between September and November 2025. It is one of the best free pictures of how businesses like yours are actually doing. Here are five numbers from it, and what each one means for your plan for the year ahead.
1. Fewer than half of small businesses were profitable
Only 47% of the firms surveyed were operating at a profit at the end of 2024. That is a sobering figure, but it is also useful context. If your business broke even or ran a small loss, you are not unusual. What matters is whether you know why.
What to do: look at your profit by product, service or customer type, not just in total. Many small businesses find that one line of work quietly carries the rest. Knowing that changes where you put your time and your marketing budget.
2. Rising costs were the most common problem
The most widely reported financial challenge was rising costs of goods, services or wages. More than 4 in 10 firms also cited cost increases linked to tariffs, rising to 69% in retail and 62% in manufacturing. In total, 77% of firms faced one or both of these cost pressures.
What to do: track your five largest costs month by month, and note the date of each supplier price change. When you can see a cost creeping up, you can renegotiate, switch suppliers or adjust your own prices before your margin disappears. A simple spreadsheet is enough to start.
3. Most businesses borrowed to cover day-to-day running costs
Sixty percent of firms applied for some type of financing in the previous 12 months, and 38% applied for a loan, line of credit or merchant cash advance. The top reason was not growth. It was paying operating expenses (56%), followed by refinancing or paying down debt (46%) and expansion or a new opportunity (42%).
What to do: if you regularly borrow to cover payroll or rent, the real issue is usually cash timing, not a lack of sales. A 13-week cash flow forecast shows the gaps weeks in advance, so you can chase invoices, change payment terms or arrange a credit line on your own schedule rather than in a hurry.
4. Most applicants got funding, but only 42% got all they asked for
Among firms that applied for financing, 42% received the full amount, 36% received some or most of it, and 22% received nothing. Of those turned down for at least some financing, 46% said the lender’s requirements were too strict.
What to do: prepare before you need the money. Lenders look for clean, up-to-date financial statements, a clear explanation of what the money is for, and evidence you can repay. Keeping your books current every month, and having a short written plan, makes the difference between a quick yes and a partial answer. Our one-page business plan guide is a good place to start.
5. Owners are less optimistic about the year ahead
The survey’s revenue expectations index fell from 39 to 33, and its employment expectations index fell from 26 to 23. Both are the lowest readings since the 2020 survey. Business owners still expect growth on balance, but fewer of them do.
What to do: plan for more than one outcome. Write down what you would do if revenue came in 10% below your target: which costs you would cut first, which hires you would delay, and which customers you would protect. Deciding this in advance is far easier than deciding it under pressure.
How to use this data in your own business
National surveys are a benchmark, not a verdict on your business. The value comes from comparing them with your own numbers. Set aside one hour this month to answer four questions:
- Were we profitable last year, and which part of the business made the money?
- Which of our five biggest costs rose fastest, and what did we do about it?
- Did we borrow to cover running costs, and could better cash planning have avoided it?
- If we needed financing next quarter, are our books and plan ready to show a lender today?
If any answer is “we don’t know”, that is the first thing to fix. Clear processes help here too: a short standard operating procedure for month-end bookkeeping keeps the numbers current without relying on memory.
Key takeaways
- Only 47% of surveyed small businesses were profitable at the end of 2024, so know exactly where your profit comes from.
- Rising costs hit 77% of firms: track your largest costs monthly and act early.
- Operating expenses were the top reason to borrow; a 13-week cash forecast reduces emergency borrowing.
- Only 42% of applicants got the full amount they asked for, so keep your books and plan lender-ready.
- Expectations are at their lowest since 2020: plan for a weaker year as well as your target.
Turn your numbers into a plan
CNM Business Consulting helps small businesses read their own numbers, plan cash flow and prepare for conversations with lenders and investors. See our services, or book a consultation and we will review your figures with you and agree the three changes that matter most for 2027.
