For immediate release

Contact: Joey Lee, Media Relations, 215-574-3840

Philadelphia, PA — The 12 Federal Reserve Banks today issued the Small Business Credit Survey: 2020 Report on Employer Firms, which examines the findings of an annual survey of small business owners nationwide. The report focuses on small employer firms — businesses that have between one and 499 full- or part-time payroll employees (hereafter “firms”). The 2019 survey yielded more than 5,500 responses from firms in the 50 states and the District of Columbia.

As policymakers and service providers enact programs to help small businesses weather the COVID-19 outbreak, the report provides baseline estimates about small firms’ performance, financing and credit positions, and relationships with lending institutions prior to the onset of the crisis. To provide deeper insights into the financial health of small firms facing an economic shock, the Federal Reserve Bank of New York also released a supplemental brief that leverages data from the survey to gauge the financial resiliency of small firms.

“Small businesses nationwide now face unprecedented challenges as the country grapples with the significant economic and social effects of the COVID-19 pandemic,” said Claire Kramer Mills, assistant vice president at the New York Fed. “Utilizing pre-outbreak data on firms’ financial cushions and funding networks, the report and brief released today offer critical, baseline information to policymakers and stakeholders on the financial and operational challenges shared by small businesses. The data underscore that while small firms reported a strong end to 2019, many continued to deal with financial challenges, and even the healthiest of firms could face tough decisions amid a sustained loss in revenue. Furthermore, by shedding light on the channels through which firms may seek financial recourse, the data can inform the design of new loan and grant programs and offer insights on how to reach businesses in need.”

Fielded in the third and fourth quarters of 2019, the report finds that a majority of small employer firms experienced revenue growth in the previous year, while more than one-third also added employees to their payroll. However, nearly two-thirds of firms reported facing financial challenges in 2019, with more than one-fifth of firms experiencing a financing shortfall despite applying for funding. A majority of firms also reported having to use an owner’s personal savings or tapping their personal networks to support their business, while less than half had obtained funds from a bank in the last five years. Additionally, the supplemental brief released today suggests that even profitable firms with low credit risk may find it difficult to weather a sustained revenue shock using cash reserves alone.

Key findings can be found in the 2020 Report on Employer Firms’  executive summary. These findings include:


  • The shares of firms reporting revenue and employment growth in 2019 were nearly unchanged from 2018. The net share of firms operating at a profit also remained flat compared with the previous year.
  • More than three-quarters of employer firms (76 percent) saw input costs increase in the previous 12 months. Among those who experienced higher costs, 61 percent of firms raised the prices they charged.
  • A majority of firms (77 percent) reported that they prefer their business to be larger than its current size, with more than one-quarter (26 percent) saying they would like their firm to be “much larger.”


  • Nearly two-thirds (64 percent) of firms reported facing financial challenges in the prior 12 months. Among the most common were challenges paying operating expenses (43 percent), difficulties with credit availability (33 percent), and issues with making payments on debt (30 percent).
  • Eighty-six percent of firms would need to take some action in order to mitigate losses if they missed two months of revenue, such as using an owner’s personal funds, taking out debt, or reducing salaries of the owner or employees.


  • The share of employer firms that applied for financing remained flat compared with 2018 at 43 percent. More than half (58 percent) of firms reported seeking $100,000 or less in financing, similar to the previous year.
  • More than one-fifth of firms experienced a financing shortfall in 2019 despite applying for financing. Furthermore, an additional 29 percent of firms may have unmet financing needs but did not seek financing for reasons such as being debt averse or having been discouraged from applying for funds.
  • “Low credit risk” firms — defined as those with an 80–100 business credit score or those with owner(s) that maintain a 720+ personal credit score — were more likely to obtain all the financing they sought (62 percent). Conversely, only 23 percent of “high credit risk” firms — those with a 1–49 business credit score or an owner(s) with a <620 credit score — reported receiving all of the financing they sought.
  • Eighty-eight percent of employer firms said they rely on an owner’s personal credit score to obtain financing, similar to levels seen in 2018. Additionally, 56 percent have used funds from their personal savings, friends, or family within the last five years to support their business.


  • Among firms that obtained financing from outside of their personal networks, banks were the most common source (44 percent), followed by online lenders (22 percent) and credit unions (6 percent).Overall, however, fewer than half of all small firms that participated in the survey obtained funds from a bank in the last five years.
  • The use of bank financing varied significantly by ownership demographics, firm revenue size, and credit risk. The highest reported bank funding was found among firms with >$1 million in annual revenues (57 percent), firms with low credit risk (55 percent), and firms with non-Hispanic white ownership (46 percent). By contrast, firms with non-Hispanic black ownership were half as likely to have obtained bank funds (23 percent), and rates were similarly low among firms with $100,000 or less in annual revenues (24 percent) and those with Hispanic ownership (34 percent).

The supplemental brief published today —Can Small Firms Weather the Economic Effects of COVID-19 — draws on data from the Small Business Credit Survey to examine the financial resiliency of employer firms and their ability to weather the potential economic effects of the COVID-19 outbreak. The brief classifies firms into three categories based on profitability, credit risk, and business funding. “Healthy” firms are those that are profitable, have a high credit score (low credit risk), and primarily use retained earnings to fund the business. Firms that meet only two of these criteria are classified as “stable,” while those that meet only one are categorized as “at risk.” Firms that do not meet any of these criteria are classified as “distressed.”

Key findings from the brief include:


  • Even after an 11-year economic expansion, 30 percent of surveyed firms were classified as “at risk” or “distressed.”
  • However, the aggregate numbers mask the varying degree of financial health among small businesses, with key distinctions seen along the lines of ownership demographics, firm size, and age of the business. Smaller firms, younger firms, and firms helmed by black or Hispanic owners were more likely to be classified as “at risk” or “distressed.”


  • Among “healthy” companies, only one in five firms could continue business as usual with their cash reserves if confronted with a two-month loss in revenue. This figure falls to less than one in ten for every other category of firm.
  • “Healthy” and “stable” firms were the most likely to cut salaries or lay off workers if they were to face a two-month loss in revenue. Conversely, “at-risk” and “distressed” firms were more likely to take out debt to support their operations.
  • Fifty-eight percent of “at-risk” firms and 62 percent of “distressed” firms reported they would use an owner’s personal funds to help sustain the business, compared with 42 percent of “healthy” firms and 50 percent of “stable” firms.

About the Small Business Credit Survey (SBCS)

The SBCS collects information about business performance, financing needs and choices, and borrowing experiences of firms with fewer than 500 employees. Responses to the SBCS provide insight into the dynamics behind aggregate lending trends and about noteworthy segments of small businesses. The results are weighted to reflect the full population of small businesses in the United States. The SBCS is not a random sample; therefore, results should be analyzed with awareness of potential methodological biases.

The SBCS includes experiences from firms across all 50 states and the District of Columbia through the joint efforts of the Federal Reserve Banks of New York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, Philadelphia, Richmond, San Francisco, and St. Louis. The 2019 SBCS collected 9,534 responses in total, 5,514 of which were from employer firms.