COVID Report: Organizing A Recovery

Making history many times over, the U.S. government passed $3 trillion as a life-support effort for American businesses, with a focus on preserving the nation’s economic backbone of small and medium-sized businesses (SMBs).

PYMNTS has surveyed over 1,000 SMB owners as part of our ongoing pandemic coverage. The latest installment, Main Street On Lockdown: Reinventing the Road to Recovery edition, documents the somewhat surprising fact that nearly 70 percent of SMBs believe they will return to pre-pandemic business models once the crisis is officially declared over.

That belief would seem to be at odds with a preponderance of data suggesting that the COVID-19 pandemic has permanently altered how we shop, eat, buy and sell — in short, everything.

Small Business, Big Lenders

Paycheck Protection Program (PPP) loans continue to dominate headlines at this stage, while applications for Small Business Administration (SBA) emergency loans actually declined.

“We noticed a sharp decline in the share of SMB owners applying for regular U.S. Small Business Administration (SBA) loans … with 32.7 percent doing so by April 6 but just 25.2 percent doing so by April 20. The share of SMB owners who were not taking any actions to mitigate the pandemic’s impacts also decreased during the same period, from 32.5 percent to 24.3 percent,” according to PYMNTS latest polling.

SMBs that applied for loans were by and large financially stable at the onset of the pandemic, and this group has generally expressed greater optimism across the survey series to date.

Despite the diverse amalgam of lenders rallied to disburse government aid money, including online banks and credit unions, PYMNTS researchers found that most applications flowed into name-brand financial institutions (FIs).

“The majority of SMB owners in our April 20 survey sought out national and regional banks when submitting their PPP applications. Our research indicates that 39.3 percent of SMB owners who successfully applied for PPP loans relied on national banks to do so, while 27 percent turned to regional banks and 17.4 percent used local and community banks,” the report states.

“Even SMB owners who had not applied for PPP loans were most likely to turn to national and regional banks to do so, with 38.9 percent saying they would rely on the former and 16.2 percent the latter.”

Back To Business?

Given societal behavior changes that have taken root, and other factors, the finding that 68 percent of SMBs polled expect prior business models to operate post-COVID stood out.

“The majority of SMB owners see the pandemic as a temporary issue requiring short-term operational changes rather than fundamental shifts in their business models,” the report states.

“Our research shows that 38.4 percent of all SMB owners have made some changes to their normal operations to weather the pandemic but planned to go back to business as usual once it passed. Another 29.5 percent said they were forced to shutter their businesses but that they intended to reopen and run them exactly as they had once the contagion risk ended.

Some SMBs planned to institute permanent operational changes after the outbreak, but they were in the minority. Our survey indicates that 26.3 percent of SMB owners aimed to keep some of the adjustments they have made, and 5.7 percent planned to maintain all of them.”

Additionally, while “… 66.4 percent of SMB owners expected to generate more online sales after the COVID-19 outbreak than they did beforehand …” according to PYMNTS findings. “SMB owners who believed in-store sales would be at least as crucial after the pandemic passed were often the most heavily or even exclusively reliant on brick-and-mortar sales.”

PYMNTS found that 61.5 percent of SMBs who relied exclusively on in-store sales previously “believed they would be able to continue operating that way even after the pandemic ended.”