NFIB Reports Major Changes in Business Owners’ Reactions to COVID-19

The National Federation of Independent Business (NFIB) Research Center’s latest survey* on the current impact of the COVID-19 outbreak on small business offers a stark contrast from a prior survey. According to the NFIB, “the magnitude of disruption now on the small business sector is profound.”

Currently, 76 percent of small businesses are negatively impacted by the outbreak of the coronavirus, a dramatic escalation from just under one-quarter of small businesses reporting the same earlier this month. About 5 percent are positively impacted. These firms are likely experiencing stronger sales due to a sharp rise in demand for certain products, goods, and services. This will presumably ease in the coming weeks as consumers feel more secure about their personal supply levels.

One in five (20 percent) of small businesses are not currently affected by the outbreak, but 77 percent of them anticipate that changing if the outbreak spreads to or spreads more broadly in their immediate area over the next three months. This marks a sharp departure from the earlier survey where 43 percent of small businesses anticipated being impacted if the virus spread. Just 4 percent do not believe they will be impacted if the outbreak escalates and 18 percent are not sure.

Of those businesses negatively impacted, 23 percent are experiencing supply chain disruptions, 54 percent are experiencing slower sales, and 9 percent reported an impact from sick employees. The owners citing sick employees likely responded out of heightened concern and precautions with sick employees showing some signs of cold- or flu-like symptoms—not necessarily because they have employees who have tested positive for the virus.

“As we can see from this newest survey, the economic downfall from COVID-19 is happening rapidly,” says Thor Stacey, NFIB state director in Alaska. “Many Alaska small business owners and their employees are struggling. Congress needs to work together to pass legislation that will pump much needed cash flow to small business owners who need to pay their employees, rent, and supplies.”

In Juneau, Mitch Falk is worried about his employees. He owns Bullwinkle’s, a pizza parlor which has two locations and employs sixty Alaskans. Now that his customers are not allowed to eat in the restaurant, Falk has been forced to reduce his employees’ hours. His goal is to not have to lay any of them off. Falk estimates he can make it through four more pay periods before he has to do that. However, he’s concerned about how his employees, who he considers family, will be able to feed their own families.

“A lot of my employees live on the edge,” says Falk. “I cried last week thinking about their fragile lives. I’m trying to keep business as normal as possible and stay positive for them. I told them they can eat as much pizza as they want during their shift and every day I’m sending all of them home with a large pizza for their families. I’ve tried to spread around hours as evenly as possible and advertised delivery specials, so hopefully that end of the business will pick up.”

Alaska small business owners are now eligible for loans through the Small Business Administration’s (SBA) Economic Injury Disaster Loan program, which offers up to $2 million in assistance, providing economic support for small businesses suffering from a loss of revenue. The loans may be used to pay fixed debts, payroll, accounts payable, and other bills they can’t pay because of COVID-19. The interest rate is 3.75 percent for small businesses. The loans have long-term repayments in order to keep the payments affordable. Longer loans can be up for thirty years depending on the borrower’s ability to pay.

Almost all small business owners are taking some sort of action adjusting to their changing economic condition or to protect themselves from potential disruption. Just 6 percent of owners have not taken any action in response to the outbreak, a market departure from 52 percent not taking action two weeks ago.

The level of concern among small business owners about the coronavirus impacting their business has elevated significantly over the past two weeks. About 68 percent of small business owners are “very” concerned about its potential impact on their business compared to 16 percent in the earlier survey. Another 23 percent are somewhat concerned and 9 percent are slightly concerned. Just 1 percent are not at all concerned.

While many small businesses (47 percent) have not talked with their bank about financing needs, 30 percent are planning to do so soon. Another 13 perent have talked with their personal bank already, 9 percent with the SBA about their loan programs, and 1 percent with an online lender.

The vast majority of small businesses are now impacted by the COVID-19 outbreak and owners are taking the threat to their business seriously. Many owners have already sought out financial help and more are planning to do so in the near future. The outbreak will leave few, if any, owners unscathed. According to the NFIB, the economic impact will be immense and now the question is how long will it last and how quickly can the small business sector recover once on the other side. Small business owners are anxious to seek clarity to both questions.

*Methodology:
This survey was conducted with a random sample of NFIB’s membership database of approximately 300,000 small business owners. The survey was conducted by email on March 20, 2020. NFIB collected 700 usable responses, all small employers with 1-360 employees.