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## SMB Borrowing Trends and Challenges

From time to time, most small and medium-sized businesses (SMBs) find themselves in need of borrowing money to address short-term needs or unexpected expenses. However, according to a recent report by PYMNTS Intelligence, many SMBs, particularly those with modest revenues, tend to avoid borrowing whenever possible.

One of the key findings in the report, “SMB Borrowing Dynamics: Trends, Tools and Decision Drivers,” conducted in partnership with U.S. Bank, highlights that smaller businesses show less interest in utilizing credit facilities.

### Insights on SMB Borrowing Behavior

The report, based on insights from 2,668 SMB executives, revealed that 90% of SMBs had to resort to borrowing tools in the previous year. Among these businesses, 73% relied on revolving credit products like credit cards and lines of credit. Additionally, almost 34% opted for buy now, pay later options, and 30% accessed merchant loans.

#### How AI legalese decoder Can Help

Businesses grappling with legal jargon and terms in borrowing agreements can benefit from the AI legalese decoder. This tool can simplify complex contracts and agreements, making it easier for SMBs to understand the terms and conditions associated with different borrowing options.

### Reasons for Reluctance in Borrowing

Despite the widespread use of borrowing tools, the report noted that around 10% of SMBs refrained from borrowing last year. This avoidance was seen in 3% of businesses earning over $10 million annually, 5% of middle-revenue firms, and close to 20% of businesses earning less than $1 million annually.

#### Addressing Concerns on Borrowing Costs

The report identified that borrowing costs were a significant concern for 34% of SMB executives surveyed. In particular, 16% of middle-revenue companies and 18% of low-revenue SMBs cited borrowing costs as a deterrent. Additionally, some businesses expressed a preference for avoiding additional debt, further emphasizing the challenges associated with borrowing.

### Outlook on SMB Financial Stability

While a few SMBs managed to operate within their budgets without the need for emergency funding, a majority required some form of financial assistance. This highlights the importance of low-cost and flexible borrowing tools for financial institutions looking to support SMBs in managing their cash flow effectively.

By leveraging tools like the AI legalese decoder, SMBs can enhance their understanding of borrowing agreements, ensuring they make informed decisions when seeking financial assistance.

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