Small business owners cut their own pay to absorb rising costs

A survey that finds owners hopeful and squeezed

KeyBank's 2026 Small Business Survey is being widely shared for its upbeat headline number: 88% of owners say they are just as motivated by the dream that led them to start their businesses.11 A less cheerful finding sits next to it. One in three owners (33%) say they have been absorbing rising costs out of their own pay instead of raising prices for customers.1114

The survey was run online by Centiment in August 2026. It covered 1,500 U.S. owners and operators of businesses with annual gross revenue below $10 million.11 The findings went out on September 30 through PR Newswire and Access Newswire. Since then, trade and finance outlets have republished them, mostly without new reporting.121519

The underlying numbers are the same everywhere, but the framing varies. KeyBank's own release presents the pay cuts as owners protecting relationships they value with customers.11 An AI-assisted summary on Capitalvelaro described owners as having "slashed" their salaries and asked whether that is sustainable for owners' finances and their businesses over time.13 A payments trade publication went with a headline about owners struggling with inflation.19 Rethinking65, which writes for financial advisers, led with resilience.15

The two readings can both be true. But the less flattering one seems to me the better guide to what comes next.

Costs are still the biggest threat

Inflation and rising costs were the top threat named in KeyBank's survey for the second year in a row. They were cited by 53% of owners, up from 50% in 2025.1117

The survey also reports some recovery in finances:

• Cash and debt: 23% of owners built up cash reserves this year, and 26% paid down debt.11
• Cash cushion: 54% say they are certain they could cover one month of operating expenses from reserves alone, up from 33% in 2024.18
• Fewer struggling: The share in "survival mode" fell to 17% from 23% in 2025.11
• More investing: 28% say they are investing for long-term growth, up from 22%.11

The bank also says 94% of owners named at least one accomplishment this year. The most common were keeping prices steady for customers, running more efficiently, and growing revenue.11

The cash-reserve figure needs some context. One month of operating expenses is a thin cushion. Even at 54%, almost half of owners could not say for certain they could cover a single month without new revenue or credit. Rising from a third to just over half in two years is real progress. It still leaves many businesses with little room for error.

When KeyBank asked owners how they define success, money was not always first. Half (51%) named freedom and autonomy, 46% named financial security, 34% said building something to hand down to family, and 30% said providing good jobs.1115 Those answers help explain the 88% figure. Owners who started a business for independence or legacy may stay committed even when the finances get worse.

KeyBank is a lender to the businesses it surveyed. Its business-banking COO, Oliver Kardos, ends a blog post about the findings by encouraging owners to work with a Key business banker.18 That does not make the numbers wrong. It does mean the bank's interpretation should be read with the source in mind.

A different picture from the NFIB

The NFIB's September Small Business Optimism Index, released October 13, reflects more caution than KeyBank's survey. The index fell 0.8 points to 97.9, just below its 52-year average of 98.0.22 Its Uncertainty Index rose to 90, far above the historical average of 68.23 Economist Andrew Foran at TD Economics noted the reading came in below the consensus forecast of 98.2.21

Other details in the NFIB report also point to strain:

• Inflation: 20% of owners named it their single most important problem, up 4 points and nearly three times the historical average of 7%.23
• Expansion: Only 7% said now is a good time to expand, down 5 points.23
• Business health: 48% rated their business "good," down 9 points, while 35% said "fair," up 7.24
• Profits: Among owners reporting lower profits, 24% blamed higher material costs, up 8 points.24

One apparent conflict needs explaining. KeyBank says a third of owners are taking cost increases out of their own pay instead of passing them on. The NFIB found a net 31% of owners raised average selling prices in September, well above the historical average of 14%, and another net 31% plan to raise them.23 TD noted that the average share of businesses raising prices in 2026 is the highest since 2023.21

The Federal Reserve's credit survey of employer firms, published in March, shows how both can happen. Among firms facing higher costs from international trade, 76% passed at least some of the increase on to customers and 60% absorbed at least some of it.10 Most owners appear to be doing a bit of each. KeyBank's survey highlights the part owners absorb, and the NFIB data shows the part they pass on.

Credit is getting more expensive

The lending backdrop has also gotten tighter. On September 16, KeyCorp raised its prime rate to 7.00%.11 The NFIB's economists wrote that the Fed raised its policy rate, market rates followed, and small-business borrowers reported paying more on new loans.23 A net 8% of owners said their most recent loan carried a higher rate, the highest share since June 2025. The average rate on short-term loans rose 0.7 points to 8.2%.23 TD reported that markets expect the Fed to tighten further in the coming months.21

Financing is still not a top complaint, though. Only 3% of NFIB respondents called financing and interest rates their biggest problem.24 Expectations for credit conditions were a net -3%, meaning slightly more owners expect tighter credit than easier credit.23 The American Bankers Association's economists said slower expansion plans could reduce demand for small-business credit, and that ongoing inflation and labor costs could squeeze margins and owners' ability to repay debt.28 For banks, that could mean less demand for commercial loans and more risk in the loans they already hold.

Owners are leaning on credit cards

Credit cards are a large part of small-business financing. Data from the Federal Reserve's survey, as cited by WalletHub, show 62% of businesses used credit cards and 44% used loans in 2025.2 Among employer firms that regularly use a card, 58% use only a business card, 8% use only a personal card, and 34% use both.7 Nav, citing research from the National Bureau of Economic Research, reports that 55% of small firms used business credit cards in the past year, compared with 26% that took out loans.1

A Bluevine survey from May adds to KeyBank's finding. It found that 75% of owners had used personal credit cards or personal loans for business expenses in the previous year.8 Of the 42% of owners who said this had affected their own finances, 23% saw their personal credit use rise and 12% said their credit score dropped.8

Personal credit also backs a lot of business borrowing. Among firms with debt, 59% have signed a personal guarantee.10 Taken together with KeyBank's finding that a third of owners are cutting their own pay, the pattern is clear. Many owners are covering business costs with their personal income and personal credit.

Card debt also carries extra risk. WalletHub notes that issuers can raise the rate on an existing business-card balance whenever they choose. On consumer cards, they have to wait until a payment is at least 60 days late.2 When rates are rising, owners carrying card balances may not know what their debt will end up costing.

Other options are not always better. Sixty percent of firms that borrowed from online lenders said their actual costs were higher than expected, compared with 37% at small banks and 32% at large banks.10 Small banks also had the highest rate of full approval, at 57% of applicants.10

Reading the two surveys together

KeyBank's numbers are true, but they are not reassuring on their own. The improvements in cash reserves and the smaller share in survival mode are real. They largely reflect the August survey period, before KeyCorp raised its prime rate in mid-September.11 The NFIB's September data shows owners getting more cautious, less willing to expand, and paying more to borrow.23

The 88% figure is better read as commitment than as confidence. It tells us owners are not walking away, not that they expect things to get easier. When owners are absorbing costs through lower pay, personal credit cards, and personal guarantees, a business problem becomes a household problem too. Owners' motivation looks solid. What remains uncertain is how much longer their personal finances can cover the gap if rates keep rising and customers start spending less, as one Ohio service-business owner told the NFIB is already happening.23