How Small Business Owners Win in 2026

0:01Nicole Lapin:I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

0:16Nicole Lapin:Business owners, side hustlers, W2 employees who are thinking about making the entrepreneurial leap, this one's for you. Because between macroeconomic factors and new AI tools, there are a lot of new opportunities for founders. Yet optimism in founders is down from last year. But you guys, we got this. Our partners at U.S. Bank put together an annual small business survey to understand the challenges facing businesses right now and ultimately help and build solutions. So to dig into what they learned this year, I'm talking to Shruti Patel, U.S. Bank's chief product officer for the business banking segment.

0:49Nicole Lapin:We talk about small business growth strategy, what Gen Z entrepreneurs specifically should know about scaling, and the small payment method switch that could make a big difference to your bottom line. Shruti Patel, welcome to Money Rehab. Well, thank you for having me, Nicole. I'm so excited. No, no, I'm so excited to talk to you because I have actually never talked to a chief product officer of a bank and I have so many suggestions and so many ideas. Well, I'm glad I have my notepad because I'll be making a lot of points. I think it's so, so cool. So thank you for being open to taking my suggestions.

1:24Nicole Lapin:I have many of them. As a business owner myself, I would love to see like a cash flow chart or something. I would love to see something go over to Texas so I don't touch it. Anyway, I have many, many ideas. But I want to dig into the survey that you guys put out because so much of what you're doing is data driven and we're all data nerds here. So what was the finding that you saw that businesses are really focused on now? So many insightful findings. I would say, This is our fourth year we do an annual survey of small businesses across the country. And it's not really just U.S. bank customers.

1:58Our intent is to really get close to the sentiment small businesses are feeling at the time of the survey is taken. Small businesses are feeling immense stressors and macro environment pressures right now. This comes as no surprise to anyone, given the steady inflation we have been in the last few years. Consumer spending and sentiment is evolving. The recent energy crisis continues to add pressure to small business operations. And so I would say, you know, the number of businesses who reported their business as successful still remained high. But we did see both the way they are reporting growth and optimism soften year over year.

2:43But what is also good is the contrarium to all of that sentiment, which is almost all of the small businesses continue to remain super resilient. And, you know, it demonstrates the durability because they continue to invest in their businesses, whether it's hiring new staff, expanding their products and services. And so, you know, I would say entrepreneurship still very much remains the backbone of the economy while they're feeling the pressures, the optimism to invest in, you know, their businesses remains very high.

3:14Nicole Lapin:I think you have to be optimistic to be an entrepreneur or crazy or both or I've had a traumatic childhood. I don't know. Like here I am living it day to day. You have to be an irrational optimist to be an entrepreneur. And what I saw really interesting in the survey was that it went from 93 percent to 83 percent. So while you said it was softening, like that's still pretty optimistic to me. Pretty optimistic. And, you know, I would say for a lot of these small businesses, it's not just business. It's very personal. The success of the business is what they're counting on, you know, to continue that livelihood.

3:47So I would say definitely a great finding for us.

3:50Nicole Lapin:Yeah, it's completely personal. I started this business with my life savings. You know, U.S. Bank helped us rebuild from the Palisades Fire. Every dollar that comes in and out of the business is so, so personal and stress is so high. So what did the survey show about stress levels? I'm assuming those are not softening. The stress levels are not softening, but we've also seen some of those stress levels show up year over year. I think the small businesses have figured out a way to navigate under this immense pressure, whether that's inflation, rising costs. You know, last year we observed tariff uncertainty.

4:28This year, tariff uncertainty was replaced by the energy crisis. And so I do think that one of the reasons why you're seeing the resilience is because they're figuring out new ways, whether that's adopting new digital tools to drive innovation. But they're determined on running their operations more effectively, more efficiently, with less capital, with rising cost. And I think that's where a lot of the resilience is really coming from. Yeah.

4:57Nicole Lapin:And I think it's so important to not just guess what the customer wants, obviously, testing, testing, testing. I mean, it took me many, many years, maybe more than a decade to figure out that I can't just go based on my gut as a business owner. I need to see what the customers want. I thought it was really interesting, though, that only 3 % of business owners want to consider some sort of M &A activity or exiting their business in this environment. Is that because there's not as much M &A activity? I think we're seeing a lot of that capex at the top around the bigger companies. Or is it that there's just a bigger sample size?

5:32Nicole Lapin:There's just more businesses popping up. I would say probably both. Yeah, I think, you know, we are going to see a great transition happen over the next 10 years. You know, last year, we reported that almost half of the small business owners are age of 55 or more. And so as they think about succession planning, transitioning, the newer demographic, like the millennials and the Gen Z stand to inherit or acquire a lot of these businesses. And we're seeing the desire to do so. So I would say it's the sample size, but also I think, you know, the M &A, but a lot of them are thinking about succession planning and transition.

6:15And there's more to come in the next 10 years as the current population thinks about, you know, stepping down and passing it on to heirs or other successors.

6:25Nicole Lapin:So passing it on to Gen Z, And I know you guys focused specifically on, if I could get in the head of all the Gen Zs, I think that that's a business in and of itself. Also decoding their jargon, too. That would be really helpful. But was there some finding specifically to Gen Z as they're looking to inherit or potentially acquire the businesses that are going to be trading? We found very interesting insights from the Gen Z. So you're absolutely right. We oversampled Gen Z small business owners in our survey. And the intent was exactly what you said. We want to get into their heads. How are they thinking about new innovative technologies?

7:02How they think about approaches to entrepreneurship? And I would say compared to the previous generations, whether that's the millennials or baby boomers, they have a very different approach to both entrepreneurship and how they think about business risk. They are willing to take very bold, calculated risk to pursue faster growth and acceleration. They are also putting less emphasis on steady, predictable revenue and more on cultural relevance, social media visibility and, you know, partnership driven growth. And one of the biggest findings we thought is that they are willing to set aside some of the personal sacrifices.

7:42And what I mean by that is a lot of them are willing to delay starting their life, whether that's getting married or starting a family, because business feels so much personal to them in the current economy. And, you know, what was really surprising is that actually it's paying off. The Gen Zs who reported having taken very bold, calculated risk-based decisions are also reporting faster growth. And they are seeing faster success in their businesses. And they're also more likely to use innovative technologies like AI and digital tools, which is a very promising sign given the journey and the excitement we are feeling about both not only digital tools, but also AI.

8:23Nicole Lapin:Well, as an elder millennial myself, what I thought was really interesting that you said specifically was bold and also calculated. So I've taken a lot of bold risks, but not all of them have been calculated. So what do you think that means? Is there more caution going into business? Is there more planning going into business? Or how is Gen Z looking at success differently than us elder millennials? I would say they put less weightage on the downside risk. So, yes, they are taking very bold calculated risk decisions. But I think, as I mentioned, you know, the emphasis on steady, predictable revenue is much less.

9:00And they're willing to accept the downside of that risk decision. And so I think it's a mix of both. It's obviously the passion, because a lot of their businesses are coming from side hustles or passion projects. But it's also placing the big bet on a decision to deliver the faster growth.

9:19Nicole Lapin:And what do you read into the idea that Gen Z is delaying more milestones? I think that millennials are also delaying milestones, too. I mean, I got married, I had a baby, all the things at 40. And so, you know, as a millennial generation, I feel like we're also we delayed milestones, got married later, had babies later. I think women in their 40s having babies is surpassing women in their 20s at this point. Absolutely right. You know, we've seen that happen in the small business sector for a few years now. I think part of it is just how the economy has evolved over the few years post-pandemic.

9:57You know, we have seen a lot more stressors and pressures for small businesses as they're thinking about entrepreneurship, which is as a result delaying a lot of their personal decisions. And so, you know, that's, I would say, a growing trend from the post-pandemic era, which we've continued to see rise.

10:14Nicole Lapin:I mean, I think you can have it all, just not all at once. Or a girlfriend of mine, Randy Zuckerberg, wrote a book. I'm going to butcher this. But she said, I think, like, pick three. You can only have three at once, like family, work, health, working out, friends or something. Like, you can only have a couple of those at a time. I would tend to agree with that. I think you can have it all, but not all at once. Yeah. Or define what it all means because it looks different for everybody. Exactly. You have to prioritize. And I think when you're running a small business, which feels also very close to home, you constantly do have to prioritize and juggle between what at the time makes the most sense for growing your business versus, you know, investing in your personal life.

10:58Nicole Lapin:I've also thought that, you know, I forgive myself for what I'm not focusing on. Like right now, I'm a terrible friend, like absolutely terrible. And I do not go to the gym like ever. But, you know, I'm focused on my business and I'm focused on raising my 18 month old daughter. And those are my priorities right now. So I think in the past, I probably would have beaten myself up. Like, I'm not doing enough to do other parts of my life. But like, right now, I'm not focusing on that. And I think there's a season for all of this. I would agree. So for Gen Z, what specifically have you guys found they determine as markers of success if the milestones look different?

11:34A majority of their Gen Z businesses were reporting less than$100K in annual revenue. So they're still pretty small passion projects. And I think for them, the marker of success is going back to what they're putting their emphasis on, which I mentioned earlier. It's the cultural relevance. It's the social or the visibility in terms of how they are placing their business within the current environment and the relevance from a cultural context perspective. I think the biggest marker for Gen Z, I would say, is how do they map out their next five to 10 year growth cycle? and the kind of risk they're willing to take in spite of that.

12:15And so more to come because, you know, that segment is still evolving from an entrepreneurship perspective, but their approach is so different. And we're already seeing very early signs compared to the older generations.

12:27Nicole Lapin:What I'm seeing just anecdotally is that, you know, our generation really thrived on this idea of fundraising. It was like the shark tank effect, right? So like you start a business, go ask the sharks for money or go raise money. or you see these big funding announcements, like somebody just raised money. And it never really clicked for me as somebody who bootstrapped my business where you're like, you're starting a business to be your own boss and you're taking money and now you have a boss in effect. So what have you guys found in terms of what capital funding looks like for Gen Z or their idea of what that looks like for success?

13:02So that's a really good question. You know, historically, we've always found more traditional routes. So that's either personal capital, you know, entrepreneurs used to invest their personal capital or rely on debt financing tools to really jumpstart their business or continue to invest in a very growing established businesses. I think Gen Zs are going a few different ways. We continue to obviously see the personal capital and debt financing, but we also see them looking for crowdfunding sources, venture capital investment, you know, really relying on some of these different ways to interact with banks and other, you know, private credit is another example where a lot of the startup community is willing to take the risk on that front.

13:45So definitely very innovative ways of getting access to capital than historically what we have seen.

13:51Nicole Lapin:So not as lauded, I guess, as the idea that raising money was so impressive for the generation before. Yes, I would agree with that. And when you're thinking about taking a loan, because if you really calculate the ROI of raising money, you're giving away part of your business. In some cases, it's actually smarter to finance it through a line of credit, through a small business loan, maybe even credit card debt. A lot of new entrepreneurs start with credit card debt and feel ashamed by that. If that business takes off, that's actually not the worst decision. So how do you advise small business owners to think about lines of credit or even getting those lines of credit?

14:34Yeah, so we, you know, we have small business specialists and our business banking teams, which work across the country, you know, with a lot of the small businesses or even, you know, the newer population, which is thinking about starting a business. We start with the fundamentals. You know, it's so important to get the fundamentals right, which is having a really strong personal credit score and having some history that you can manage liquidity or cash flow successfully, because that gives a lot of the banks and small financial institutions sort of the confidence that even if your business goes through a few rough bumps, you have the ability to manage your cash flow in a very disciplined and measured way.

15:15We also make sure that, you know, our bankers work very closely with a lot of these startup entrepreneurs to help them with verifiable documents. You need to have very comprehensive and well-documented tax returns because that tells us the history of your personal financial wealth. So I would say there are a few ways, you know, having a great tested product concept is important before you are starting a business. But in addition to that, I would also say, you know, work with your banker on figuring out what your cash flow held, your personal credit held, your liquidity held, whether you have tax returns and other financial statements readily available.

15:54I would also say, you know, look at all of the different facilities available, whether that is the SBA lending facility, which the government, you know, provides to a lot of small businesses who are, you know, growing their businesses or, you know, starting with a small start alone, you know, something really small to jumpstart a proof of concept or product. And the last one is, you know, always test your product before you take a big scale. That's a good, that's a personal advice we give to all of our small business entrepreneurs.

16:24Nicole Lapin:Honestly, I don't even think I know this. Do businesses have a credit score? Businesses do have a credit score. Really? Like their own up to 800? It's less about, it's more about KYB. So, you know, But that happens more once the business is established and growing. We try to make sure that this is a legitimate business. It's, you know, we understand better the products and services it is providing and the health of the business through its tax returns and cash flow statements. So that's more for established businesses because that gives us more view into the health of the business once it has started.

17:01But for somebody who's starting a business, the personal credit score plays a much more bigger role than for somebody who's already had a business.

17:09Nicole Lapin:Cool. So to set yourself up in the best way as an entrepreneur to get a business loan, what would be the one recommendation you have? Really measuring and keeping a close eye on your personal credit score. That's so important because as you're starting a business, you have to deal with a thousand other things that you often put yourself in your personal life last. So say it louder, Shruti, for the people in the back who are neglecting themselves as they're running through entrepreneurship life. Yeah, I would say for anybody who is thinking about entrepreneurship or thinking about starting a business, it is really important to keep a really good eye on your historical personal credit score.

17:55Nicole Lapin:Is there any words of caution that you would give to business owners who would have to be personally guaranteed for something like that? You know, having comprehensive documents is really, really important. So many times in our day-to-day operations, when small businesses enter our branches or talk to our small business bankers, they are actually quite surprised by the requirement for comprehensive documents, whether that is their tax returns, cash flow statements, their own personal credit score. And so I would say, you know, it's really important for small businesses to keep an eye and continue to measure that with discipline.

18:34Nicole Lapin:Oh, yeah. I am living proof of this. You have to really want it. You have to really, really want that loan. It's not easy, you know, which makes sense. Like you're lending money to a business and most businesses aren't successful in those early years. So you want to make sure that you're getting your money back. I get that. But it's not easy. It is not easy, but we also want to make sure that the small businesses who are essentially looking to access working capital or apply for a loan, we want to make sure those businesses are healthy. They're not high risk and there's not much volatility and that we have confidence on those small business entrepreneurs to actually manage their cash flow more efficiently.

19:22Of course.

19:23Nicole Lapin:And it's funny that you say healthy because I would always joke when I was going through the SBA process that it felt like a financial colonoscopy to me. It's a government guaranteed loan. So, you know, that is why they put you through the rigor because it's completely guaranteed. There is no downside risk. And so I think when you go through the SBA process, you do feel it's a colonoscopy because of the guarantee. True story. I'm glad I'm not alone. I thought it was just me. No, no. Okay, let's talk about AI because you mentioned it briefly, but I want to dig into it. What were the findings in the survey around how AI is now being used by business owners?

20:06Nicole Lapin:It sounds like it's not just for the fun of it, but it's actually 84 % said that AI saved them money. For me, I'm spending a lot of money on AI. It hasn't saved me money just yet, but it sounds like a lot of people are finding that. So you bring up two really good points. Number one was, you know, in our survey findings, three quarters of the business did report that they are adopting AI and they continue to see both. And most of them actually reported that AI helped them save money. They are, you know, it's very measured in the way they are determining ROI on the investments they're making in adoption of the technologies.

20:42and end-to-end operation efficiencies are being realized for those businesses. But a lot of them also said that it's too expensive or overrated and they do not know whether the industry they operate in or the vertical they are operating in actually has relevant adoption for AI. There's a lot of buzz around just the amount of data centers being built for AI and how expensive the technology is. But we continue to hear small businesses who are adopting some of these tools still reporting back-end efficiency. So I would say both. While the verdict is out there around what the cost of that investment looks like, a lot of businesses are still finding benefits.