Nearly 40% of small businesses say they’ll be forced to shutter without additional support from the federal government, according to a survey from the Federal Reserve.
The survey, which received responses from nearly 10,000 businesses with fewer than 500 employees, found that 89% of small businesses had yet to return to pre-pandemic sales levels almost a year after the first business restrictions were introduced in the United States.
More than three-quarters of those businesses reported a drop in income, and nearly half said they had already or were going to cut their workforce in response to the depressed demand.
Even as some states and localities begin to lift coronavirus restrictions, a strong majority of small businesses, 59%, said weak demand among consumers was a bigger challenge facing their business than new restrictions. Supply chain disruptions, such as those seen in the early days of the pandemic, were also a major concern among businesses, and just over one-quarter of all businesses stressed labor shortage concerns.
Despite the Paycheck Protection Program and other forgivable loan programs established to address the coronavirus pandemic, the number of firms that took on debt last year rose 8 percentage points compared to 2019, up to almost 80%. The number of companies with more than $100,000 in outstanding debt surged 13 percentage points, up to 44%.
“The report put out by the Fed highlights the challenges we’re hearing from our small-businesses members: weak customer demand and limited credit,” National Small Business Association Vice President of Public Affairs Molly Day told the Washington Examiner. “And while the PPP has undoubtedly been helpful, small-business outlook remains shaky, making PPP and similar programs critical. In fact, when we asked our members, the two biggest issues to the future survival of their business is economic uncertainty and the pandemic.”
Nearly two-thirds of the surveyed businesses said they would apply for federal aid if it becomes available.
The report comes as President Biden negotiates with lawmakers to pass a $1.9 trillion coronavirus relief package that includes, among other things, much-needed aid to small and mid-sized businesses. Biden met this week with 10 Republican senators who crafted a pared-down $618 billion bill that includes additional resources for the Paycheck Protection Program and the Economic Injury Disaster Loan Program.
Biden said the proposal was “way too small,” according to Senate Majority Leader Chuck Schumer. He and other Democratic lawmakers are preparing to pursue the larger bill through the budget reconciliation process, which would require a simple majority in the Senate, if a deal cannot be reached with Republicans.
