Research

Up To $400 Billion Available To Small Businesses Through The Employee Retention Credit

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Apr 25, 2023 • 10 min read
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      Small businesses looking for an infusion of cash could benefit from up to $400 billion in refundable tax credits through the Employee Retention Credit program based on a Lendio analysis of internal and SBA data. Signed into law as part of the CARES Act to provide relief during the COVID-19 pandemic, the Employee Retention Credit allows qualifying small businesses who retained W-2 employees throughout 2020-2021, to claim up to $26,000 per W-2 employee. 

      On average businesses that apply through Lendio receive $74,000 through the ERC. Qualified businesses with less than two W-2 employees average $13,000, and companies with 25+ W-2 employees average $302,000. 

      Based purely on the number of small businesses and the number of W-2 employees at those businesses the highest potential amount totals up to $1.5 trillion, but after going through complex qualification criteria, businesses get, on average, $7,000 per W-2 employee out of the maximum $26,000. 

      Full qualification requirements include:

      2020 qualifications:

      • Qualifying wages of up to 100 full-time W-2 employees;
      • A decrease in gross revenue of at least 50% compared to the corresponding quarter in 2019;
      • Or either a full or partial suspension of business operations created by a government mandate 

      2021 qualifications:

      • Qualifying wages of up to 500 full-time W-2 employees
        • At least 95% of businesses in every state have less than 500 employees
      • A decrease in gross revenue of at least 20% compared to the corresponding quarter in 2019
      • Or either a full or partial suspension of business operations created by a government mandate

      ERC Opportunity By State

      By combining SBA data on:

      • Number of small businesses in each state in 2020 and 2021
      • Number of small business W-2 employees in each state in 2020 and 2021

      With Lendio data on the typical credit amount small businesses qualify for, Lendio found the potential dollar amount available to SMBs in each state.

      State# Of Small BusinessesLikely ERC Potential Available For SMBs
      AK73,981$955,463,790.00
      AL408,374$5,650,103,976.00
      AR258,552$3,435,787,167.00
      AZ611,097$7,693,400,000.00
      CA4,200,000$50,921,700,000.00
      CO674,741$8,258,300,000.00
      CT355,596$5,181,664,955.00
      DC79,814$1,776,757,105.00
      DE88,051$1,325,359,503.00
      FL2,800,000$25,043,900,000.00
      GA1,100,000$11,889,800,000.00
      HI137,328$1,925,000,584.00
      IA273,969$4,559,925,524.00
      ID176,029$2,333,867,134.00
      IL1,200,000$17,485,000,000.00
      IN529,456$8,392,800,000.00
      KS258,012$4,212,078,665.00
      KY360,756$5,007,094,984.00
      LA464,527$6,338,986,883.00
      MA715,425$10,491,000,000.00
      MD618,214$8,392,800,000.00
      ME150,593$2,052,182,977.00
      MI902,131$13,288,600,000.00
      MN533,344$9,092,200,000.00
      MO542,519$8,392,800,000.00
      MS264,858$3,061,171,849.00
      MT126,219$1,739,868,328.00
      NC964,280$11,889,800,000.00
      ND75,427$1,371,983,121.00
      NE180,988$2,904,851,376.00
      NH137,811$2,125,962,145.00
      NJ937,436$13,154,100,000.00
      NM158,844$2,398,205,747.00
      NV297,183$3,635,511,059.00
      NY2,300,000$28,675,400,000.00
      OH982,035$15,386,800,000.00
      OK362,364$4,997,755,842.00
      OR396,925$6,220,658,087.00
      PA1,100,000$17,485,000,000.00
      RI106,412$1,611,751,698.00
      SC445,804$5,788,076,766.00
      SD89,942$1,469,637,384.00
      TN636,842$7,693,400,000.00
      TX3,000,000$34,136,100,000.00
      UT313,590$4,220,845,106.00
      VA783,977$11,190,400,000.00
      VT79,189$1,105,428,062.00
      WA647,639$9,791,600,000.00
      WI461,525$9,092,200,000.00
      WV113,184$1,899,631,463.00
      WY70,618$911,135,280.00

      States Most Likely To Qualify

      While Lendio’s analysis found potential money available largely aligns with the population of each state, certain states and industries are more likely to have businesses who qualify for the Employee Retention Credit based on the number of government mandates that impacted businesses and how broadly pandemic precautions impacted certain industries.

      Businesses in the following states are most likely to qualify for the Employee Retention Credit based on being above average in the following variables:

      • Average number of qualifying quarters
      • Percent of the qualifying quarters revenue was impacted
      • Percent of the qualifying quarters a government order impacted that industry
      • Percent of the time there was no government order
      • Average last date of government order
      StateZ Score
      NY3.85
      MI3.77
      NJ3.45
      WA3.00
      CO2.90
      CA2.69
      NM2.05
      OH2.00
      MD1.92
      MA1.88
      IL1.12
      AL1.06
      NV1.03
      OR0.80
      LA0.77
      PA0.71
      MO0.00
      Based on data provided by ERC Pros.

      ERC Opportunity By Industry

      The following industries are most likely to qualify for the Employee Retention Credit based on being above average in the following variables:

      • Average number of qualifying quarters
      • Percent of the qualifying quarters revenue was impacted
      • Percent of the qualifying quarters a government order impacted that industry
      • Percent of the time there was no government order
      • Average last date of government order
      IndustryZ Score
      Gym3.98
      Amusement / Recreation3.68
      Church3.63
      Beauty Salon3.43
      Restaurant3.06
      Real Estate2.79
      Retail2.69
      Laundry Services1.52
      Bakery1.48
      Assisted Living1.36
      Manufacturing1.16
      School1.15
      Based on data provided by ERC Pros.

      Advice For Small Businesses

      Recent news around ‘ERC Mills’ taking advantage of small businesses is a great reminder to all small business owners to work with reputable companies when filing their tax credit. Lendio has been supporting small businesses for over a decade and has facilitated more than 350,000 small business loans in addition to facilitating more than $10 billion in PPP loan and ERC approvals as part of government COVID-19/CARES Act relief.

      The qualification criteria for the ERC have evolved over time. Credible ERC professionals can help you navigate these details and maximize your refund. 

      If you are qualifying due to a full or partial suspension rather than a decline in gross receipts, providing detailed documentation of how your business was impacted by a government order is key to ensuring your application is approved. 

      • Was your ability to provide goods or services to your customers affected? Did foot traffic in your store go down by 10, 20, 30%? Or did you lose half of your contracts because Zoom meetings didn’t cut it? There are lots of ways to be specific here.
      • Were any external businesses impacted by government orders that then impacted your normal operations? If you had a hard time getting supplies from vendors, let us know the dates, vendor names, and details.
      • Visit our ERC FAQs for more information about the Employee Retention Credit.

      If in doubt about whether you’ll qualify for the money, still apply for free. You may be surprised by what you can qualify for. 

      Sources

      Lendio Proprietary Data

      ERC Pros Proprietary Data

      2020 SBA state profiles

      2021 SBA state profiles 

      About the author
      Lendio

      Lendio's team of experts is here to help you with every nook and cranny of your business. We'll make sure you have the best advice for financing, operations, management, hiring, and much more.

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