Small business finance looks different across tax returns and employer-firm surveys. IRS data for tax year 2022 show the scale of receipts, deductions and profits among nonfarm sole proprietorships, while the Federal Reserve’s 2025 Small Business Credit Survey describes employer firms’ financial conditions and financing experiences.
Contents
- Receipts, deductions and profitability
- Financial pressures and cash flow
- Debt, collateral and regular financing
- Why businesses sought financing
- Credit products, requested amounts and lenders
- Approval outcomes and borrowing costs
Receipts, deductions and profitability
The IRS counted 30.9838 million nonfarm sole-proprietorship returns in tax year 2022. Those businesses reported $2,080.7 billion in total business receipts. Receipts increased 11.4% from 2021 to 2022, indicating substantial nominal growth across the group. These figures cover nonfarm sole proprietorships and should not be read as a count of every type of small business.
Total business deductions reached $1,671.9 billion in tax year 2022, up 14.7% from 2021. Total profits were $410.7 billion, but profits decreased 0.2% from the prior year. The contrast between higher receipts and slightly lower profits highlights why revenue alone is not a complete measure of financial health.
The IRS also reported that, in constant 2017 dollars, nonfarm sole-proprietorship profits fell 6.8%, from $373.2 billion in 2021 to $347.9 billion in 2022. Net income less deficits equaled 19.7% of business receipts in 2022, down from a 22.0% profit share in 2021. The constant-dollar figures and the nominal figures measure the same tax-year comparison in different terms; neither should be used to estimate an individual firm’s margin.
Professional, scientific and technical services generated $101.6 billion in sole-proprietorship profits in 2022. That was 24.7% of total nonfarm sole-proprietorship profits, making the sector the largest specifically identified profit contributor in the IRS figures.
Source: Sole Proprietorship Returns, Tax Year 2022, IRS. The IRS statistics use tax-year data and are not a forecast.
Financial pressures and cash flow
The Federal Reserve’s 2025 survey found that 47% of employer firms were operating at a profit at the end of 2024. Another 19% were breaking even, while 34% were operating at a loss. This is a different population and measurement point from the IRS sole-proprietorship statistics: the survey describes employer firms, and the profitability snapshot is specifically for the end of 2024.
Cost and cash-flow pressures were widespread during the survey’s prior-12-month period, approximately September–November 2024 through September–November 2025. Seventy-seven percent of employer firms experienced increased costs of goods, services or wages. Fifty-four percent cited paying operating expenses as a financial challenge, and 48% cited weak sales.
Uneven cash flow was a challenge for 47% of employer firms. Thirty-six percent cited making payments on debt or dealing with interest rates. Together, these measures show several distinct pressures: rising input costs, the need to cover routine expenses, demand weakness, timing gaps in cash receipts and debt-service concerns.
The survey does not say that every firm experienced all of these problems, and the percentages are not additive. A firm could report increased costs and weak sales at the same time, for example. The results are best read as the share identifying each challenge during the stated period.
Source: 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey, Federal Reserve.
Debt, collateral and regular financing
At the time of the September–November 2025 survey, 31% of employer firms had no outstanding debt. The Federal Reserve reported that 63% held $100,000 or less in outstanding debt, while 37% held more than $100,000. The detailed distribution was:
| Outstanding debt | Share of employer firms |
|---|---|
| $25,000 or less | 10% |
| $50,001–$100,000 | 12% |
| $100,001–$250,000 | 15% |
| $250,001–$1 million | 15% |
| More than $1 million | 8% |
The published categories leave the $25,001–$50,000 band implicit in the supplied breakdown; the reported 63% at $100,000 or less and 37% above $100,000 are the broader figures to use when comparing debt levels. The categories also describe outstanding debt at the survey date, not new borrowing during the prior year.
Among employer firms with debt, 59% used a personal guarantee to secure it, and 38% used the owner’s personal assets. These figures concern firms that had debt and therefore should not be applied to the entire employer-firm population without qualification. They also show that business borrowing can involve personal financial exposure.
Why businesses sought financing
Sixty percent of employer firms sought some type of financing during the survey’s prior-12-month period, approximately September–November 2024 through September–November 2025. Among financing applicants, 56% sought funds to meet operating expenses. This was the most common stated purpose in the supplied results.
Growth and flexibility were also common reasons. Forty-six percent sought funds to expand, pursue a new opportunity or acquire business assets. Forty-two percent sought available credit for future use as needed. Twenty-eight percent sought financing to refinance or pay down debt, while 26% sought funds to make repairs or replace capital assets.
The purpose percentages describe financing applicants and are not mutually exclusive. One applicant may have sought financing for operating expenses and also wanted available credit for a future opportunity. They should therefore be used to understand the mix of demand rather than to calculate a single total share of financing need.
The pattern connects financing demand with the earlier cash-flow findings. Operating expenses, uneven cash flow and increased costs can create short-term funding needs, while expansion and asset replacement represent longer-term or investment-oriented uses. The survey results quantify the reasons firms gave; they do not establish whether financing improved later performance.
Credit products, requested amounts and lenders
Among employer firms, 38% sought a loan, line of credit or merchant cash advance during the prior-12-month survey period. Twenty-nine percent sought a credit card, 17% sought trade credit, 11% sought a lease and 3% sought factoring. Because firms could seek more than one product, these percentages should not be added together.
Among financing applicants, requested amounts were distributed across several bands:
| Amount sought | Share of financing applicants |
|---|---|
| $25,000 or less | 21% |
| $25,001–$50,000 | 16% |
| $50,001–$100,000 | 22% |
| $100,001–$250,000 | 19% |
| $250,001–$1 million | 14% |
| More than $1 million | 8% |
The largest single band was $50,001–$100,000 at 22%, followed by $25,000 or less at 21% and $100,001–$250,000 at 19%. The bands describe requested amounts, not the amounts ultimately approved or received.
For loan, line-of-credit and merchant-cash-advance applicants, 41% applied at large banks, 28% at small banks and 14% at online lenders. The lender shares do not represent every financing product, because this comparison is limited to those three types of applicants.
Approval outcomes and borrowing costs
Among loan, line-of-credit and merchant-cash-advance applicants, 42% received all the financing sought. Another 15% received most but not all, 21% received some but not most, and 22% received none. The results distinguish partial access from full approval: receiving some financing did not necessarily satisfy the original request.
Among applicants who did not receive at least some of the financing sought, 46% cited lender requirements that were too strict. Thirty-seven percent cited too much existing debt, 30% cited a low credit score and 29% cited insufficient collateral. These are reported reasons among a subset of unsuccessful applicants, not a diagnosis for every declined application.
Full-approval rates differed by lender type. The rate was 57% for applicants at small banks, compared with 31% at large banks. The full-approval rate for applicants at online lenders was 27%. These comparisons describe survey-reported outcomes for the specified applicant group and period; they do not by themselves show that lender type caused the difference.
Borrowing costs also differed in reported expectations. Among approved borrowers, 60% of online-lender borrowers said their actual borrowing costs were higher than expected. The comparable figure for small-bank borrowers was 37%. The supplied results do not provide a full cost measure or explain the specific products, terms or fees behind those expectations, so the percentages should be treated as borrower-reported experience rather than a universal price comparison.
Source for the survey findings: 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey, Federal Reserve. The survey period is approximately September–November 2024 through September–November 2025 for prior-12-month measures, with profitability measured at the end of 2024 and debt measured at the time of the September–November 2025 survey.