PROFIT MASTERY PRESENTS
The Profit Move
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THE NUMBER
60%
of small businesses applied for financing last year
56%
of those applicants were covering operating expenses
60% of small businesses applied for financing last year. The most common reason was covering operating expenses.
Fifty-six percent of applicants said they were seeking money to meet operating expenses. Pursuing an expansion or a new opportunity came second, at 46%.
Borrowing to fund operations is not automatically a problem. A seasonal line of credit is good management. Financing inventory before your busy quarter is good management.
The question is which one you are. Funding a working capital cycle you understand and have priced for is a plan. Covering a gap you can't explain is something else, and from the outside the two look identical.
Source: 2026 Report on Employer Firms, Small Business Credit Survey, Federal Reserve Banks. Fielded September to November 2025, published March 3, 2026. 6,525 small employer firms.
▍WORTH KNOWING
Optimism just hit an 11-month high. The NFIB Small Business Optimism Index rose 2.4 points in July to 99.8, its highest reading since August 2025 and above the 52-year average of 98. It was 97.4 in June. Released August 11.
Sentiment gets measured every month. Borrowing behavior gets measured once a year, and the last full read is the Fed survey above. So owners feel better than they have since last August, while the most recent hard look at their borrowing says a lot of it went to covering operations.
Feeling better and being liquid are two different readings. Same as profit and cash.
Where you borrow changes what it costs. In the same Fed survey, 60% of owners who borrowed from online lenders said the actual cost came in higher than they expected. At large banks that number was 32%. Applicants at small banks were also the most likely to be fully approved, at 57%.
From the archive. Most owners shop a loan on the interest rate. Colin argues the term that actually decides whether you can live with the loan is a different one. The Most Important Loan Term
▍THIS WEEK'S MOVE
Reconcile one month. Not six.
Open last month's P&L and write down net income.
Open the bank statement for that same month. Write down the beginning balance and the ending balance, then subtract.
Those two numbers will not match. Sometimes cash comes in higher than profit, sometimes lower. Either way, the difference is the thing most owners never actually look at.
Then find it. Five usual suspects:
• Money customers owe you but haven't paid yet
• Inventory you bought and haven't sold yet
• Loan principal, which drains cash every month and never appears on your P&L
• Depreciation, which lowers profit without any cash leaving
• Money you took out of the business
Four of those five pull cash below profit, which is why a good month on paper can feel tight. Depreciation runs the other way. It's the reason a thin month can still leave cash in the account.
Don't reconcile it to the penny. Just name the biggest one. That takes about ten minutes and it tells you something your P&L never will.
▍THIS WEEK'S ARTICLE
Cash or Accrual? Wrong Question.
Ask any accountant which method you should use and you will hear "accrual" before you finish the sentence. Colin agrees with them, and still thinks it's the wrong question to be asking.
His argument is that the two methods answer two different questions, and you need both answers to run a business.
Free to read. Substack will ask you to click once first.
▍UPCOMING
Price for Profit, Not Just to Win the Job
Friday, September 4, 10:00 to 11:00am ET, virtual. $39, included with PM Pro.
Office Hours for PM Pro
September 11, October 9, November 13, December 11, 10:00am ET. Members only.
If the reconcile above showed a gap, price is one of the few levers that closes it fast. Costs take months to move. A pricing decision moves cash next invoice.
One hour, September 4. $39, or free if you're a PM Pro member.
Run the reconcile this week? Hit reply and tell us which of the five was your biggest gap. We read every reply.
The Profit Mastery Team
Know your numbers. Command your cash. Scale with confidence.
The Profit Move is education, not personalized financial or investment advice.