That’s according to a new report published by the Federal Reserve, which found that sales for 88% of small businesses have not yet returned to pre-crisis levels. About one in three — roughly 30% — of businesses said they expected they could not stay afloat without further assistance from the government, according to the report from the U.S. central bank’s 12 regional offices.
The Small Business Credit Survey was conducted in September and October of last year, before Congress passed the latest $900 billion coronavirus relief package and relaunched the Paycheck Protection Program. But the report, based on responses from close to 10,000 businesses with fewer than 500 employees, underscores the extent of the pain inflicted on small businesses by the pandemic and lockdown measures implemented to curb the spread of the virus.
“At the time our survey was fielded, six months into the pandemic, closures, layoffs, depressed revenue, and uncertainty continued to plague small businesses across the country,” the report said. “Small business debt mounted and business owners plowed their personal savings into their firms to keep them afloat.”
At the time, more than 90% of small businesses said they had applied for aid, including 83% who sought a forgivable loan through the Paycheck Protection Program. About three-fourths, or 77%, said they received the aid they wanted.
But the report also highlighted the uneven toll of the pandemic on minority-owned businesses. While 57% of businesses said their financial situation was “fair” or “poor” in the fall, that figured increased to 77% for Black-owned firms and 66% for Latino-owned firms.
Congress established the $670 billion Paycheck Protection Program last year with the passage of the CARES Act at the end of March. Lawmakers authorized another $284 billion in December to provide a second round of forgivable loans to small businesses as part of its more comprehensive $900 billion COVID relief plan.
At least $40 billion has been set aside for businesses with 10 or fewer employees and for loans under $250,000 in low-income areas.
Only businesses with 300 employees or fewer are eligible to receive a second loan, which will be capped at $2 million. Borrowers also need to prove that they saw a 25% reduction in gross receipts during a quarter in 2020 compared with the same quarter in 2019.
During the first round, businesses with fewer than 500 employees could receive as much as $10 million.
Congressional Democrats are also pushing ahead with passing President Biden’s $1.9 trillion coronavirus relief plan, which is expected to establish a new $15 billion program separate from the PPP for small businesses. The measure would also make a $35 billion investment in some state, local, tribal and non-profit financing programs that can provide low-interest loans and venture capital to help small businesses.