How Small Businesses Are Faring Entering Year Two of the Pandemic

Episode Summary

Executive Summary: Goldman Sachs’ survey and two small-business owners show PPP funding was crucial to survival, but many firms still face depleted cash, weak access to credit, health-care strain, and a long recovery. Brent Reeves and Joellen Hockenbrown describe painful pivots, workforce burdens, and community support, while also expressing optimism about reopening and resilience.

Main Topics: Survey findings on PPP relief (Priority: 5/5): Joe Wall summarizes a Goldman Sachs survey of nearly 1,300 small-business participants, showing strong uptake of the second PPP loan and its importance for survival and rehiring, but also warning that many firms will exhaust funds within months. Long recovery and cash-flow risk (Priority: 5/5): The survey indicates many businesses do not expect normal operations until late 2021 or 2022, and only a small share feel confident about maintaining payroll without additional aid. Access to capital and health insurance challenges (Priority: 4/5): Confidence in obtaining loans or lines of credit has dropped since before the pandemic, while employer health-care costs have risen for most firms that offer coverage. Personal and workforce toll of COVID-19 (Priority: 5/5): Owners report mental-health strain, drained personal savings, unpaid self-salary, and the emotional burden of layoffs or reduced hours for employees treated like family. Small-business pivots and digital adaptation (Priority: 5/5): Brent Reeves and Joellen Hockenbrown explain how they shifted from dine-in and in-studio experiences to delivery, takeout, online classes, and streaming to preserve revenue and community ties. Racial disparities for Black-owned businesses (Priority: 5/5): The survey shows Black business owners lag the broader population in PPP application, approval, access to capital, and health insurance coverage for employees. Community support and future optimism (Priority: 4/5): Both owners highlight local and national support, especially for Black-owned businesses, and look forward to returning to in-person connection while keeping useful virtual elements.

Key Arguments: PPP has been essential to keeping small businesses alive, but it is temporary support and will not solve ongoing liquidity problems. Many small businesses still face a delayed recovery, with a large share expecting to run out of funding by spring or early summer. Access to credit worsened during the pandemic, making external financing harder just when businesses need it most. The pandemic intensified the human cost of entrepreneurship: owners used personal savings, skipped pay, and absorbed mental-health stress along with their staff. Small businesses succeeded by rapidly changing operations—takeout, delivery, livestreaming, and virtual service delivery—while preserving customer relationships. Black-owned businesses have experienced a more uneven recovery, with lower PPP uptake and lower approval rates than the overall small-business population. Community backing, including renewed support for Black-owned businesses, has been a major source of survival and morale. Owners remain hopeful that in-person experiences will return, though virtual channels will likely remain part of their business models.

Data Points: Survey sample size: Nearly 1,300 - Goldman Sachs small-business participants or entrepreneurs surveyed Number of surveys conducted: 7 - This was the seventh tracking survey since last March Second PPP eligibility: Two-thirds - Share of small businesses that qualify for a second PPP loan Second PPP application rate: 83% - Of those qualifying, the share who applied Second PPP approval/funding rate: 54% - Share of applicants who were approved and received funding Second PPP importance: 88% - Share saying the second PPP loan was absolutely vital or very important to survival Hiring/rehiring impact: 55% - Share saying they were able to rehire or hire new employees because of the second loan Funding exhaustion timeline: 67% - Share of businesses with a second PPP loan expecting to run out of funding in April or May Payroll confidence without more relief: 11% - Share very confident they can maintain payroll without further government relief Normal operations timeline: 43% - Share saying operations will not be back to normal until Q4 2021 or 2022 Access to capital confidence: 30% - Share very confident they could access a line of credit or loan from a financial institution Pre-pandemic access to capital confidence: 54% - Baseline level before the pandemic Health insurance provision: 50% - Share of small businesses providing health insurance to employees Increased employer health costs: 79% - Among those providing insurance, share with increased costs in the past year COVID mental-health impact: 46% - Share saying they or their employees faced mental-health-related issues stemming from COVID-19 Used personal savings: 50% - Share of small business owners who dipped into personal savings Forgone owner pay: 58% - Share who have not paid themselves at some point during the pandemic Black owners applied for second PPP: 73% - Share of eligible Black business owners who applied, versus 83% overall Black owners approved/funded: 42% - Share of Black applicants approved and funded, 12 points below overall population Black owners access to capital confidence: 16% - Share very confident they could access a line of credit or loan Black owners providing health insurance: 29% - Share of Black business owners able to provide employee health coverage, versus 50% overall Smokey John's revenue drop: 55% - Brent Reeves says revenue fell in the first three weeks of COVID Lost catering revenue: $45,000 - Immediate catering cancellations at Smokey John's Providence Power Yoga closure period: March 15 to first week of July - Studio remained closed before reopening Second shutdown at yoga studio: Three weeks - Additional shutdown from November to December

Pivotal Quotes: "88% say the second PPP loan has been absolutely vital or very important to helping their businesses survive." — Joe Wall: Survey summary on the role of the second PPP loan "Creativity is truly our way out of this situation." — Brent Reeves: Reflecting on how Smokey John's adapted during the pandemic "I think I've worked harder this past year than I did probably the first year we were open." — Joellen Hockenbrown: Describing the intensity and emotional strain of operating through COVID-19

Implications: Small-business recovery remains fragile and uneven; liquidity support, credit access, and worker support will stay critical. Many firms will keep hybrid digital/in-person models, while policymakers must address disparities facing Black-owned businesses.