An annual small business survey released on Feb. 3 by the 12 U.S. Federal Reserve Banks provides a painful snapshot of how small businesses have fared as a result of the Covid-19 pandemic.
The Fed conducted its annual small-business survey during September and October, six months into the pandemic.
The survey focuses on firms with between one and 499 employees that were still in business when the survey was conducted. It did not include businesses that are permanently closed.
The report found that Covid-19 and the restrictions placed on businesses and customers to combat it created a crisis for small businesses. 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.“
For many of the 9,693 nationwide firms that responded, the outlook remains tenuous, according to the report. Sales for 88% of the firms had not returned to pre-pandemic levels.
The majority of firms, 64%, said they would apply for another round of government aid if it were offered. This survey was taken before the latest pandemic aid package was passed in late December. Of those firms, 39% expected they would be unlikely to survive until sales returned to normal without further government assistance.
The survey found stark disparities by the race of business owners. While 57% of firms overall characterized their financial condition as “fair” or “poor,” this figure jumped to 79% for Asian-owned firms, 77% for Black-owned firms, and 66% for Latinx-owned firms.
Thirty-seven percent of firms expect that the most important challenge stemming from the pandemic in the next 12 months will be weak demand, followed by government-mandated restrictions or closures (53%) and supply chain disruptions (37%).
Almost all the small employer firms surveyed (91%) applied for emergency funding. Eighty-two percent of employer firms applied for Paycheck Protection Program (PPP) loans; 77% percent of PPP applicants received all the funding they sought.
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 they requested. PPP recipients were also more likely to rehire employees they laid off once they received the funds.
To read the report, click here.