- Minority-owned businesses struggled the most to access credit during the pandemic, a Fed survey found.
- Just shy of 80% of Asian-owned firms, and 77% of Black-owned firms, said their financial condition was “fair” or “poor.”
- Minority-owned businesses are more worried than white-owned businesses about accessing credit in 2021.
- Visit the Business section of Insider for more stories.
The vast majority of US small businesses took a hit to their revenue in 2020 because of the coronavirus pandemic, with minority-owned businesses struggling the most and worrying more about accessing credit, according to a Federal Reserve survey released on Wednesday.
The survey, which was conducted in September and October — after the first two rounds of the Paycheck Protection Program (PPP) had closed to new applicants and before Congress had finalized a nearly $900 billion aid package — showed many small businesses worried they would not survive without government help.
Of the nearly 10,000 small businesses surveyed by the Fed, 95% said their business was impacted by the pandemic. Just shy of 80% reported a decline in revenue and 46% said they had to shrink their staff.
Nearly 90% of small businesses said sales had not returned to pre-pandemic levels by the time of the survey. Of those companies, about a third said it would be unlikely that the business would survive until sales recovered without more government help. Some 53% of businesses expected their total sales revenue to drop by more than 25% in 2020.
Outcomes varied widely by race and ethnicity. Some 54% of white-owned firms described their financial condition as “fair” or “poor.” But that share rose to 79% for Asian-owned businesses, to 77% for Black-owned firms and to 66% for Hispanic-owned businesses.
The majority of businesses surveyed, or more than 90%, looked for some sort of emergency funding during the pandemic, with the most common being the PPP, which provided loans that could be converted to grants under certain conditions. Some 82% of small employers applied for funds from the PPP and 77% of applicants received all of the funding they sought.
Companies that received PPP funds were more likely to retain or rehire their employees, but the aid was not enough to avoid all staff cuts. For instance, 46% of firms that received all the PPP funds they requested reduced their workforces. But that share increased to 71% for firms that received no PPP funding.
Minority-owned businesses were more concerned than white-owned businesses about their ability to access credit over the next year, the Fed survey found.
Credit availability was the top concern for Black-owned firms, cited by 30% of businesses in that group. Some 20% of Hispanic-owned businesses and 14% of Asian-owned businesses said they were worried about credit availability, compared to 12% of white-owned businesses.
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