Statement of the Hon. Nydia M. Velazquez on State of the Small Business Economy in the Era of COVID-19
Washington, February 4, 2021
This past year, COVID-19 sparked a once in a lifetime crisis for American small businesses. As we meet today, entrepreneurs nationwide are holding on to their businesses for dear life.
According to research published by the Federal Reserve Bank of New York, the number of active business owners fell by 22% from February to April 2020, the largest drop on record. That same research showed minority-owned businesses faced the worst outcome. This pandemic has hit minority-owned businesses the hardest. COVID has caused a 41% decline in Black-owned businesses and a 32% decline in Latino-owned businesses.
As we start the new year, it’s not clear that conditions have improved. As the virus has continued to spread, small businesses are increasingly pessimistic on their outlook for 2021. The NFIB Small Business Optimism Index declined 5.5 points in December to 95.9, a level not seen since 1973. Even more troubling is that 27% of firms considered themselves to be “at risk or distressed.”
The pandemic has hit small businesses that rely on large gatherings and foot traffic especially hard. According to the New York State Restaurant Association, more than half of all restaurants in New York City are in danger of closing forever. While small businesses in hospitality, retail, travel, leisure, entertainment, and others that rely on foot traffic for revenue struggled, big businesses thrived. Profits soared for large corporations like Amazon, Wal-Mart, Home Depot, Best Buy, Costco, and others who gained market share and saw their stock prices rise accordingly. According to the Washington Post, 45 of the 50 most valuable publicly traded U.S. companies turned a profit between April and September 2020, one of the most tumultuous economic periods in modern history.
We need to be thinking about big and bold policies to provide small businesses with the resources they need to make it through this crisis and grow in the future. In December, Congress passed a bill reopening the Paycheck Protection Program, allocating new funding for EIDL Advances, and creating the Shuttered Venue Grants Program. These initiatives will save jobs and help businesses stay afloat. But that relief package was only a down payment on the stimulus the small business economy needs. Small businesses are still in crisis and we must do more.
Looking forward, we must enact bold relief measures under the Biden Administration that reflect the dire reality Main Street firms face. Small businesses have made it clear they need more direct and flexible cash infusions. Throughout this pandemic, small business owners told our Committee they couldn’t afford to take on additional debt during this uncertain time. Programs like the targeted EIDL Advances will provide small business owners with desperately needed relief without weighing down their balance sheets. We will hear testimony today about the benefits of Advances, and other grants, and if more funding is required.
In addition to capital, small businesses also need access to customers. The U.S. Federal Government is the largest consumer globally, purchasing over $500 billion in goods and services each year. The Federal government can play a unique role in supporting small businesses by using the Defense Production Act and “Buy American” policies to increase the customer base of the small businesses economy.
Our nation’s recovery depends on the wellbeing of small businesses and their employees. These are uncertain times for American entrepreneurs, and this Committee must help lead them to the other side of this crisis. Members of this Committee serve as the voice of small businesses in the House, and we must work tirelessly to support them. Today’s hearing will give us a clearer view of the small business economy’s state and the work we need to do going forward.