Survey shows pandemic’s severe impact on U.S. small businesses

A survey of more than 8,000 small-business owners shows that they are becoming increasingly pessimistic about their company’s prospects despite federal relief.
Shop owner in a surgical mask hanging a closed sign on the door of her business.


Small-business owners across the United States were struggling with pandemic-related disruptions and had already laid off large numbers of employees by the time Congress passed its initial relief package, according to the preliminary results of a nationwide survey of small businesses by researchers at Yale, Princeton, and Oxford universities.  

The survey of more than 8,000 small-business owners — conducted between March 28 and April 20 — offers insight into how small businesses have responded to economic uncertainty amid the COVD-19 crisis. It shows that business owners have become increasingly pessimistic about their company’s prospects despite federal relief efforts. It also provides evidence that owners of the smallest businesses — those with fewer than 10 employees — are often unaware that state and federal aid programs exist. Even when owners are familiar with government programs, their misconceptions may have discouraged them from participating.

The COVID-19 crisis presents severe challenges for all small businesses, which account for the majority of companies in the United States,” said John Eric Humphries, an assistant professor of economics in Yale’s Faculty of Arts and Sciences and a principal investigator on the project. “The data and insights we’ve collected can help policymakers design and implement effective measures to support small businesses in these extremely challenging times.”

The survey, which will be updated frequently, and an associated working paper, are part of a broader collaborative project by researchers at Yale, Princeton, and Oxford to understand the challenges small businesses are facing amid the pandemic and help them overcome the resulting economic turmoil. Yale’s Tobin Center for Economic Policy is funding the research.

This study brings distinctive perspective, offering new detail and understanding of how small businesses are adapting and on their outlook for the future,” said David Wilkinson, the Tobin Center’s executive director. “The Tobin Center seeks to reduce time between research and impact. This scholarship provides government information on small business sentiment much faster than traditional alternatives — valuable information to have, given the rapidly changing landscape.”

On March 27, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which included $349 billion for funding the Paycheck Protection Program (PPP), which extends forgivable loans to small businesses. Despite this federal relief effort, small businesses have continued to lay off employees, the survey shows, and owners harbor increasingly negative views of the future.

More than 60% of respondents reported laying off at least one employee due to the pandemic, and 31% stated that they expected to have layoffs within the next 60 days. A quarter of respondents don’t expect to ever recover, and 31% reported believing that they have a 50% chance of going bankrupt or out of business within the next six months.

Business owners’ confidence in the future deteriorated steadily over the course of the survey. In the first week, 37% reported that they did not expect their companies to recover within two years. That number rose to 46% during the final week of this initial phase of the survey.

The researchers found that businesses with fewer than 10 full-time employees had less awareness of government assistance programs than bigger firms, and had the slowest growth in awareness after the CARES Act was enacted when compared to businesses with 10 to 50 full-time workers. Only about half of businesses with fewer than five employees reported knowing about government programs that could help them before the first round of PPP applications closed. That share remained below 70% through April 16, when the program’s initial funding was exhausted.

Our findings support the idea that there was unequal access to federal aid, with larger firms being better informed and equipped to apply for relief,” Humphries said. “Policymakers should consider ways to better publicize relief programs and remove barriers to access so that the country’s smallest businesses can obtain assistance.”

The survey also gathered perspectives from individual business owners, including their insights on the specific challenges they face and what types of policy measures would most benefit them.

Defer rent and mortgages,” said a small business owner in Michigan. “Ask credit cards to waive interest rates. Offer more grants to small business. Loans should be for the corporations, who are more likely to be able to pay back. Small businesses need the grant money.”

This project is among several the Tobin Center is advancing in response to the challenges presented by COVID-19. Princeton’s Industrial Relations Section also is supporting the small-business project.

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Part of the In Focus Collection: Yale responds to COVID-19

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