Three in ten small businesses — or 9 million out of the estimated 30 million in the United States — fear they won’t survive in the coming year without additional government assistance, according to a survey recently published by the Federal Reserve.
What are the details?
The Small Business Credit Survey, which was conducted last September and October and released last week, showcased the incredible burden the coronavirus pandemic has placed on America’s small businesses, as 88% of the businesses surveyed reported that sales had not yet returned to pre-pandemic levels.
Nearly one-third of respondents reportedly told surveyors that without further financial help or a return to normal sales, their businesses would likely close for good.
Among minority-owned businesses, things were markedly worse. While in total, 57% of firms said their financial condition was “fair” or “poor,” that figure shot up to 79% for Asian-owned firms, 77% for black-owned firms, and 66% for Hispanic-owned firms.
The percentage of small firms carrying debt also increased to 79% from 71% the year before, and those carrying a debt burden north of $100,000 increased from 31% to 44% in 2020.
Nearly all businesses surveyed said they expected to face at least one more pandemic-related challenge over the next year. However, the two challenges most firms expected were “weak demand for products/services” and “government-mandated restrictions or closures.”
The bleak outlook among small business owners in the country expressed late last year was confirmed by another survey released this month, which tracks small business optimism.
The National Federation of Independent Business published its January survey on Tuesday. It found that small business confidence is at an eight-month low. Furthermore, the number of small business owners expecting better conditions through the middle of the year has hit its lowest level since 2013.
It’s difficult to be optimistic about business, added Randy George, owner of the Red Hen Baking Company in Vermont, noting that his business hasn’t been allowed to have indoor dining since last April.
“We do have a lot of people coming to the window and getting sandwiches to go, but, it’s a window,” George said.
Commenting on the survey, Bill Dunkelberg, head of the NFIB, told Marketplace that the news is not just bad for small businesses, but could end up dragging down the entire economy.
When businesses expect sales to decline, “that’s going to feed back into their capital spending plans, and their inventory investment plans, and their hiring plans,” he said.