By John Lettieri, president, & CEO, Economic Innovation Group
Small businesses are the backbone of our economy and the heart of our communities, and the economic fallout from the pandemic has imperiled them like nothing prior to our lifetimes.
More than one million business owners have disappeared since February. Small Business Administration data from July reminds us that Black entrepreneurs remain the face of the crisis: their numbers are down 18.4 percent relative to this time last year, a loss that is three times steeper, relatively, than for whites (-6.2 percent). Alarmingly, a majority of small businesses do not expect operations to return to normal levels for at least six months…
More than one million business owners have disappeared since February. Small Business Administration data from July reminds us that Black entrepreneurs remain the face of the crisis: their numbers are down 18.4 percent relative to this time last year, a loss that is three times steeper, relatively, than for whites (-6.2 percent). Alarmingly, a majority of small businesses do not expect operations to return to normal levels for at least six months, if ever, according to the latest Census Bureau Small Business Pulse Survey.
With nearly one-third of small businesses reporting revenue declines in mid-August, the crisis appears to be entering a perilous new phase that will threaten the survival of millions of small businesses. But Congress has not only failed to enact a small business relief program that matches the scale of this threat, but it has also allowed the primary relief program, the Paycheck Protection Program, to expire for weeks on end.
EIG has worked throughout the crisis to deliver timely analysis of unfolding economic conditions and advance policy solutions to address the challenges prompted by COVID-19. As Congress returns from August recess, we will work with partners across the country to renew our push for the resources small businesses need to adapt and survive the difficult months ahead.
Here are highlights from our recent work on the small business crisis:
After a six-week hiatus, the U.S. Census Bureau released new data on the condition of the country’s small business sector as this unprecedented economic crisis unfolds. The data highlights a small business sector in dire need of Congressional action toward long-term relief. EIG continues to monitor the weekly release of this data, publishing key takeaways on our blog every Friday.
Major takeaways from the last two weeks include:
Demonstrating a need for continued relief, 25 percent of small businesses expect they will need to obtain financial assistance or additional capital in the next six months for their business to stay afloat. Roughly one in 20 businesses surveyed expects to have to close permanently in the next six months.
More firms are firing than hiring. Across all respondents, 11 percent of small businesses decreased the number of paid employees in the week of August 16th, while only 7 percent increased the number of employees on their payroll. The same pattern holds in employee hours.
Stagnating and declining revenues across businesses indicate that the small business recovery is stalling. Revenues fell again for nearly one-third of responding businesses the week of August 16th and only 9 percent of firms reported revenue increases, down significantly from the 20 percent that enjoyed recovering receipts at the end of June. The stalled fight against the virus appears to be leaving the majority of small businesses in a holding pattern, however, as 58 percent of respondents saw no change in revenues over the week.
One out of every five responding businesses is operating at less than 50 percent capacity relative to a year ago. A majority of business owners surveyed remain below max operating capacity with 20 percent of businesses experiencing a 50 percent or more drop in operating capacity. On the flip side, only 7 percent of respondents had expanded operating capacity, a striking indicator of stalling growth in the face of the COVID-19 pandemic.
The online transition is limited. While much attention has been paid to the shift of white-collar employees to working from home, 53 percent of respondents to the survey reported having no employees who worked from home during the week of August 16th, 2020. The high percentage suggests just how challenging it is for many segments of the economy and workforce to go online. Only 1 in 4 businesses report increasing their use of online platforms to offer goods and services since March, implying that the nation’s small business sector has only partially adjusted to the new normal.
- Fewer than 1 in 5 businesses have been able to weather the pandemic without seeking some form of assistance. Around three-quarters of businesses requested assistance through the Paycheck Protection Program (PPP) while more than 25 percent have sought Economic Injury Disaster Loans (EIDL). More than 1 in 10 businesses have turned to some form of self-financing, a higher percentage than have used state and local government programs or banks outside of a federal program.
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John Lettieri, President & CEO at Economic Innovation Group, Washington D.C. Metro Area. Interested in what makes people and places thrive. He’s a husband, dad, and long-suffering fan of Demon Deacons. https://eig.org
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