U.S. small businesses still struggle from pandemic

Visa’s proprietary Small Business Health Indexes and a nationwide survey of small business owners show how America’s small businesses are coping during the COVID-19 pandemic.

September 2, 2020 — Small business spending fell sharply for the second straight quarter due to a significant drop in revenues caused by pandemic lockdowns. Additionally, many small businesses shifted their spending to debit cards. Spikes in COVID-19, that began toward the end of June, paused reopenings and created more uncertainty for the future.

Outstanding balances on Visa small business credit cards dropped 7.8 points in Q2 as businesses decreased spending overall and preferred borrowing funds through SBA-led (Small Business Assocation) programs or traditional bank loans to borrowing on their credit card. This follows a general trend across the economy of large declines in revolving debt.

Risk again ticked up with increases in both delinquencies (+5.6) and charge-offs (+1.3) in Q2. Federal assistance programs and forbearance regulations helped keep many small businesses current on their credit card during the second quarter. However, with COVID-related restrictions continuing longer than expected, many more small businesses are at risk of missing credit card payments through the rest of this year.

Small businesses continue to face unprecedented challenges due to the COVID-19 pandemic. Despite small businesses cutting spending and taking advantage of SBA loan programs, a large amount of uncertainty remains.

      — Wayne Best, Chief Economist, Visa Inc.

Nearly six months into the U.S. COVID-19 pandemic, small businesses are cautiously adjusting to the new reality and are making recovery plans, according to Visa’s recent quarterly online survey of small businesses:

  • Falling short on 2020 revenue targets — A third of small businesses fear they won’t even meet half of their annual revenue goals. To offset lower revenues, small businesses are decreasing their spend and looking for external financial support.
  • A long road to recovery — Most small businesses are optimistic for a recovery, but anticipate it’ll take at least three months before it happens. However, nearly half are worried their business won’t be able to survive a second wave of COVID-19 closures. 
  • Planning for the future — From resuming projects to evolving their service and product offerings, small businesses are returning to work. By the end of 2020, many expect in-person meetings and employee benefits to resume. Additionally, more than 80 percent of small businesses are making plans to help prepare for another disruptive event.
  • Getting support from financial service companies — Immediate support, such as flexible payment options, debt relief and access to funds, appeal to small business owners.

The road to small business recovery 

Bar chart showing the range of recovery among small businesses. See Image description for more details.

Bar chart showing the range of recovery among small businesses, including 35% that have started to recover financially and expect to fully recover in the next 12 months. Of those that have not yet started to recover financially, 43% expect to start seeing recovery in the next 3-6 months, while 22% do not.

Disclaimer

Case studies, research and recommended practice recommendations are intended for informational purposes only and should not be relied upon for marketing, legal, technical, tax, financial or other advice. When implementing any new strategy or practice, you should consult with your legal counsel to determine what laws and regulations may apply to your specific circumstances. The actual costs, savings and benefits of a card program may vary based upon your specific business needs and program requirements. Visa makes no representations and warranties as to the information contained herein and member is solely responsible for any use of the information in this presentation in connection with its card programs.

Forward-looking statements

This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are generally identified by words such as “outlook,” “forecast,” “projected,” “could,” “expects,” “will” and other similar expressions. Examples of such forward-looking statements include, but are not limited to, statements we make about Visa’s business, economic outlooks, population expansion and analyses. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance, and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. Studies, survey results, research, recommendations, opportunity assessments, claims, etc. (the “Statements”) should be considered directional only. The Statements should not be relied upon for marketing, legal, regulatory or other advice. The Statements should be independently evaluated in light of your specific business needs and any applicable laws and regulations. Visa is not responsible for your use of the Statements, including errors of any kind, or any assumptions or conclusions you might draw from their use.

Methodology

Except where otherwise noted, statements herein are based on:

  • Visa Small Business Health Indexes, pulled from proprietary Visa data indexed to Q1 of 2013 and calculated as follows:
  • Spending Index: Changes in spending per spend-active small business credit card account
  • Borrowing Index: Changes in balances per balance-active small business credit card account
  • Risk Index: Changes in share of balances delinquent and balances charged-off in a quarter on Visa small business credit cards
  • The national small business survey of approximately 1000 small business owners, administered by Kelton once per quarter. The summer survey was fielded June 30-July 8, 2020.