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Each month, The Pulse offers up market research insights gained by polling small business customers like you.

Our inaugural issue of The Pulse found that entrepreneurs were primarily focused on business growth, and that 50% of those surveyed had established specific sales targets.* Indeed, growth issues (of revenues, profits, customers, markets) were a main concern of Scotiabank small business customers. This article looks at the challenges business owners face when funding this growth.

Factors that influence growth
Scotiabank small business customers identified the following issues as the main determinants of business growth success:

• Money/ Financing / Capital / Cash flow — 40%
• Good bank / Banking relationship — 20%
• Credit / Loans / Line of credit — 13%
• Investments — 13%
• Credit / Debt reduction — 7%
• Interest rates — 7%

But when small business customers were asked what was absolutely critical to achieving their sales goals, 32% of respondents said ""having access to credit in suitable amounts.""

If your business is in growth mode, be sure to check out the rest of the Get Growing for business site. It has a wealth of resources to help you manage your finances to better support your business growth objectives. For example:

• For a handy way to evaluate your cash flow, check out Scotia Blueprint for business™ Check-up tool. It analyzes your cash flow to identify working capital that you can reinvest in your business.
• For some practical tips on boosting your cash flow, check out 10 ways to boost your cash flow from our Article Library.
• For some strategies on how to borrow effectively, check out How to manage your borrowing costs.

The Big Picture
Financial decisions for your business are not made in a vacuum, but in the context of the larger economic picture and the direction of interest rates. To help us understand how these are related, we asked Aron Gampel, Vice-President & Deputy Chief Economist with Scotia Economics, for his take on the larger economic picture.

The Bank of Canada did not cut interest rates in June, to the surprise of many. Is inflation now the Bank's main concern?

It was a surprise that the Bank kept its overnight rate unchanged in early June at 3%, since it had been signaling that even lower interest rates were still in the cards. The abrupt change in sentiment by investors, businesses, and policymakers alike reflects the rapidly changing dynamics of inflation. The ""one-two"" punch of escalating energy and food costs has forced central bankers — here in Canada, but also in the United States and throughout Europe — to become more defensive.

Does this mean that interest rates are headed higher? Is now a good time for small business to borrow to expand?

If the inflationary push from rising food and energy costs spills over into wage trends, then the Bank of Canada would have little choice but to begin another round of interest-rate hikes. However, with the Canadian economy showing more signs of under-performance, especially in the export-sensitive manufacturing centres of Ontario and Quebec, we believe that short-term borrowing costs are likely to stay where they are for the foreseeable future. Canada's overall inflation rate remains much lower than in many countries, in large part thanks to the moderating effect of the strong Canadian dollar.

With energy prices rising, are Canadian consumers cutting back on discretionary spending? If so, how will this trend affect small business?

The evidence to date is inconclusive, though it is a good bet that rising energy and food costs are taking a bigger bite out of discretionary purchasing power. However, car sales have remained relatively robust, as Canadians switch to more fuel-efficient vehicles. Retail sales are still quite buoyant, with many Canadians focusing on home and cottage renovations that improve energy and water efficiencies. And unlike developments in the U.S., the Canadian economy continues to generate new employment opportunities — a development that will help support domestic spending.

*Scotiabank Small Business Through Your Customers' Eyes Survey, April 2008. A total of 641 small business customers completed the survey.