A report today by the 12 U.S. Federal Reserve Banks paints a grim picture of the status of small businesses in the U.S. as a result of the Covid-19 pandemic.
The Fed conducted its annual small-business survey during September and October and found that Covid-19 and the restrictions to combat it created a crisis for small businesses that was continuing. It analyzed 9,693 responses from firms that had employees and an additional 4,531 from businesses that did not have a payroll. The report is titled “The Small Business Credit Survey: 2021 Report on Employer Firms.“
The Fed found that sales for 88% of small businesses had not returned to pre-pandemic levels. Of those firms, 30% said it would be unlikely without government help that the firm could survive until sales recovered.
While 54% of firms characterized their overall financial condition as “fair” or “poor,” businesses in the “fair” or “poor” category jumped to 79% of Asian-owned firms, 77% of Black-owned firms and 66% of Latin-owned firms
Almost every small business responding to the survey, 95%, said the pandemic had impacted their business. Revenue declines were reported by 78% and 46% reported they reduced their workforces. Fifty-three percent of the firms responding to the survey said they expected total sales revenue for 2020 to decrease by more than 25%.
When asked to define the most important challenge as a result of the pandemic that they expect to face in the next 12 months, 37% said it would be weak demand, while 53% said it would be government-mandated restrictions or closuings and 37% cited supply chain disruptions.
In providing information about the financial challenges they faced, 62% of owners reported using personal funds to stay afloat while 55% cut staff hours and downsized operations. Almost all the small-employer firms surveyed applied for emergency funding from the government. Those that received all they requested were less likely to reduce payroll and more likely to rehire laid-off employees than firms that did not receive all of the aid they requested.
Paycheck Protection Program (PPP) funding was applied for by 82% of the employers and 77% percent of PPP applicants said they received all the funding they sought.
The number of firms carrying debt increased, as did those with a debt load of more than $100,000. Seventy-nine percent of firms had debt outstanding, an increase from 71% in 2019. The amount of debt firms held increased; the share of firms with more than $100,000 in debt rose from 31% in 2019 to 44% in 2020.
The survey found that 80% of business owners”™ personal finances were impacted, with 63% not drawing or reducing their salary and 51% paying business expenses with their personal funds.
Industries covered in the survey included: professional services and real estate, 20%; nonmanufacturing goods production and associated services, 18%; business support and consumer services, 15%; retail, 13%; health care and education, 13%; leisure and hospitality, 11%; finance and insurance 6%; and manufacturing 4%.
