Young woman with face mask working indoors in cafe, disinfecting counter.

Report Finds Small Businesses Are Struggling But Persevering

5 min read • Mar 03, 2021 • Derek Miller

The Small Business Credit Survey (SBCS) received more than 9,600 responses from small businesses—those with fewer than 500 employees—across all 50 states. The goal of the Federal Reserve Small Business Credit Report is to evaluate small business performance and the credit conditions that could affect them.

Questions from this survey certainly focused on the COVID-19 pandemic and how it impacts employers—and therefore the economy as a whole—but it also provides intriguing insights about the broader future of small business.

Here are a few key findings to better understand the state of small businesses today and how they might impact you.

No Surprise: The Pandemic Was Rough on Small Businesses

While there’s no doubt the pandemic negatively affected small business owners across the country and in varying industries, the experts at the SBCS wanted to explore just how impacted the companies have been in order to gauge how long it’ll take them to bounce back. 

More than half (57%) reported their financial situation currently as fair or poor, with only 11% saying their situation was very good and 6% saying it was excellent. When asked about sales changes because of the pandemic, 81% of firms said their sales dropped in 2020 because of the pandemic, and 53% expected their sales to decline more than 25%—and a quarter of respondents expect a decrease of more than 50%. 

Only 9% of respondents saw a sales increase this year. 

Even the firms that were in a good financial place in 2019 and had plans for growth this year were likely affected by the pandemic and needed to rethink their operational budgets to match their revenue. As the rest of the report shows, COVID-19 impacted everything from owners’ personal funds to their ability to hire new staff. 

Small Business Owners Dipped Into Personal Funds

Small business owners often work to keep their business and personal finances separate—both to stay on good terms with the IRS and to protect their personal assets in the event of a problem with the business. 

However, the pandemic forced many entrepreneurs to blend the 2 lines, with 62% of business owners dipping into personal funds to address their professional financial challenges. Employers also opted to cut staff hours, seek grants and donations, make late payments, or take on debt to stay in business. 

In fact, only 20% of small business owners said the pandemic didn’t affect their personal finances, while 63% of respondents said they drew a reduced salary—or no salary at all. 

Business owners also borrowed money from personal connections like family members or friends, drew money from their retirement accounts, or worried whether their personal credit scores could have been affected by professional stress. 

Although many people applied for federal assistance, the reality was that government help alone wasn’t enough to keep businesses open during the pandemic. 

Looking Ahead: Most Firms Still Expect Revenue Decreases

Many business owners would be happy to put 2020 behind them and focus on the potential for a better year with the pandemic (hopefully) coming to an end in 2021, but the damage from the past year is likely to hurt business owners in the coming quarters. 

When asked about potential growth in 2021, 41% of owners expect their revenue to decrease in the next 12 months, and 19% expect their revenue levels to remain the same. This dramatically bucks the trend of past reports, where revenue growth expectations were always high and optimistic. 

Similarly, there isn’t much optimism in the employment market. While 16% of companies expect their staffing numbers to decrease this year, only 31% expect their numbers to increase—meaning that many of the people who were laid off in 2020 won’t have the opportunity to get their jobs back or as many opportunities as before to find work. 

These numbers impact the economy as a whole, as high unemployment numbers limit the opportunity for business growth. 

Weak Demand Continues to Drive Concerns

Regardless of the stock market or government predictions, the consumer economy continues to determine the success or failure of local businesses. As long as Americans lack buying power from unemployment or don’t feel safe visiting businesses during the pandemic, sales will continue to slump. 

When asked about 2021, 95% of small business owners expect to face at least 1 pandemic-related challenge over the next 12 months. The top problem that they anticipate is weak demand for their products or services (59%). Other foreseen problems include government-mandated restrictions (53%) and supply chain disruptions (37%). 

A strong example of this struggle is the cruise ship industry, which can serve as a bellwether for small businesses within the hospitality and tourism fields. Many major lines have canceled their cruises through May. 

Even if they could sail tomorrow, cruise ships would have to limit how many people were on board and adjust activities for social distancing. And even with these measures in place, demand for cruise tours might stay low if travelers don’t think they’re safe. The mixture of consumer demand and government limits is keeping the ships at port. 

Small Business Owners Can Start Rebuilding Now

Despite the gloomy employment numbers and predictions for 2021, there are some glimmers of hope in the small business world. Most entrepreneurs have survived the most sudden and wide-sweeping catastrophe of the past 100 years—and they continue to keep fighting and coming up with new solutions every day.

Both consumers and business owners have adapted to this “new normal” and are ready to keep working through the pandemic. Plus, with each vaccine administered, Americans get a step closer to the pandemic’s end.

If you’re ready to push your business through the pandemic’s home stretch but need extra funding to make ends meet, let our team help you. Review your funding options through our loan guide and explore the elements of PPP loan relief to stay abreast of new funds allocated by the government. Our team is here for you.


Derek Miller

Derek Miller is the CMO of Smack Apparel, the content guru at, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy,, and StartupCamp.