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The small-business landscape has changed dramatically during the pandemic. What does the Small Business Credit Survey tell us about the reasons for and ramifications of these changes?

Ann Marie Wiersch
Ann Marie Wiersch, Community Development Policy Advisor

As appeared in the Cleveland Fed Digest's Ask the Expert on 08.31.2021

Issue #46 | August 31, 2021

Like everybody else, when I was out and about in my community last year, I saw many businesses close, and while many have reopened, in some storefronts “for lease” signs popped up instead. Many of these are “mom and pop” small businesses, and without those businesses, I think we all feel the loss of these parts of our Main Streets.

As policymakers and public officials think about ways to address the challenges business owners face, including those brought about by the pandemic, and help put these firms in a position to survive and continue to employ the people that they do, there’s a constant need for data. The Small Business Credit Survey is a really important source of timely data on small-business experiences. The Fed’s annual survey gathers responses from small firms of varying sizes, from those with no employees to those with 499 employees, and these insights fill a gap in the broader understanding of these businesses’ experiences.

For example, we’ve seen in the last three or five years that, for a variety of reasons, small businesses have become more reliant on fintech lenders, or various types of online lenders, and that riskier borrowers were more likely to turn to these nonbank sources. We expected the availability of credit through these lenders might be reduced if there was a significant economic downturn because a lot of these fintech lenders’ ability to lend relies on dollars from investors. During downturns, small-business loans that are unsecured, or not tied to real estate or another asset, are not as safe an investment, and we did see it play out: A number of the big fintech lenders stopped offering their small-business loan and line of credit products. The 2020 Small Business Credit Survey showed that the trend, the increasing use of fintech lenders, reversed as a greater share of small businesses that applied for financing turned instead to traditional banks. Furthermore, we saw that smaller banks were really successful in getting Paycheck Protection Program (PPP) loans to these businesses. So small banks continue to be an important financial services provider for small businesses. We’ll be watching over the next couple of years to see how the market for small-business loans and lines of credit changes as programs such as the PPP wind down.

Eighty-one percent of all US small businesses are “nonemployer firms,” or those that employ only their owner(s). Our latest report focuses on this type of small business. The sheer number of them makes them important to the broad economy. It’s important for researchers to reinforce for policymakers, service providers, and others that the experiences of large businesses during times like the COVID-19 pandemic are not widely reflective of the experiences of small businesses, which are integral to their communities, to the vitality of Main Streets in all corners of our country. They’re providers of jobs and connectors in our communities.

A lot of smaller firms are more reliant on their owners’ personal funds because the firms don’t have access to investment dollars and loans the way that larger businesses might. So, when they’re in a pinch and need to pay a bill, it can mean using the personal checkbook instead of the business one. In our 2020 survey, we asked a question about the impact of business challenges on the owners’ personal finances, and we found that more than 80 percent of small-business owners experienced negative effects since the onset of the pandemic. Among the smallest firms in our sample—nonemployers with less than $100,000 in annual revenues—the share negatively affected was even higher, at 88 percent. So, the impact to households is significant: People took less salary, they borrowed against their homes, and they dipped into retirement accounts and savings. You can imagine where the pandemic might have some longer-term effects.

Read the Small Business Credit Survey 2021 Report on Nonemployer Firms.

The 2021 Small Business Credit Survey opens September 8. Become a survey partner.


Ann Marie Wiersch is a community development policy advisor with the Cleveland Fed who works on the Fed’s Small Business Credit Survey and other research relating to small businesses’ access to credit. She’s been working on the survey since its inception in 2014.

Have a question of your own for Ann Marie? Email her.


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