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SMBs and the PPP: What’s Next for Small Businesses

As of May 17, 2020, roughly 2 in 5 small and midsized businesses (SMBs) had applied for a loan from the Paycheck Protection Program (PPP). Who applied for this support? Why have, and haven’t, businesses applied? And, how are SMBs feeling about their future? Paychex surveyed U.S. SMBs weekly in April and early May* to answer these questions and to keep a finger on the pulse of the companies at the heart of the U.S. economy. Here’s what the research found.
An optimistic small business owner at his computer

Please note that we are actively monitoring evolving legislation and will continue to provide information as it becomes available. While we are moving swiftly to analyze and share these updates with our customers and the general public in real-time, some aspects of this article may be dated as updates continue to be announced. For more information on the stimulus plan signed into law on December 27, 2020, read our article on the Relief Act. To learn more about financial relief opportunities under the new law, read our article on extended relief with unemployment benefits.

SMBs Optimism Holding Steady

Despite current challenges, on a scale of one to 100 (with 100 being “extremely optimistic”), SMB optimism has increased slightly from 45 in late April, to 52 in mid-May. Overall, SMBs are neither optimistic nor pessimistic, and see themselves surviving the pandemic. Interestingly, companies of all sizes across all industries share this business outlook. The fastest-growing SMBs — those with anticipated growth of 10% or more this year — are the most optimistic, though, at 75.

Most Businesses Say They Will Prevail

In general, SMBs feel they can weather this challenging time: when asked how resilient SMBs feel their business is on a scale of one to 100, the median response is 70. The largest SMBs (those with 50 to 500 employees) rate themselves slightly more resilient (80) than those with two to nine employees (70). Again, interestingly, all industries share a similar outlook in terms of resilience; the biggest difference, however, is in how companies are continuing to operate.
Of the 300 businesses surveyed, 46% are fully open, 42% are partially open, and 12% are currently closed, but plan to reopen.

The PPP as a Lifeline to Small Businesses

The PPP is an important way for some SMBs to stay afloat and keep employees on the payroll. Two in five SMBs have applied for PPP funds. The SMBs most likely to seek PPP funds are:

  • Larger. 37% of SMBs with 2 to 9 employees applied for the PPP, compared to 44% of those with 10 to 49 employees, and 71% of those with 50 to 500 employees. 
  • Growing moderately. 57% of SMBs that expect single-digit growth in 2020 have applied for a PPP loan. That compares to 45% of those who expect no or negative growth, and 38% of those who expect to grow by double digits or more.
  • Older. 40% of companies less than 10 years old applied for a PPP loan, versus 44% of companies 10 to 19 years old, and 48% of companies 20 years old or older.
  • Higher-revenue. 29% of companies with expected 2020 revenue of less than $500K applied for a PPP loan, compared to 51% of companies in the $500K to $1 million range, and 63% of companies expecting to make more than $1 million.
  • Younger leaders. 48% of SMBs run by millennials and Gen Xers have applied for the PPP, versus 40% of SMBs run by older principals.

PPP Applications Vary by Industry

The need for immediate help, application requirements, and lack of banking relationships have impacted likelihood of certain businesses applying for the PPP. Businesses in the professional services industry have applied for more loans than any other industry (54%), followed by manufacturing (47%), retail/wholesale (35%), and personal services (32%).

PPP Funding Status Varies Widely

As of mid-May, three in five (58%) of PPP loan applicants received funding through the PPP. 9% of applicants had been approved but were still awaiting payment; 20% had submitted paperwork but were still awaiting approval; 4% weren’t able to get their application approved before the first round of PPP funding ran out, and 7% had their application delayed or rejected.

Why Some SMBs Did Not Apply for the PPP

A surprising number of SMBs — two in three — did not throw their hat in the ring for the PPP. Their reasons varied, as follows:

  • No need for financing: 71%
  • Couldn’t find an SBA-approved bank that would accept my application: 7%
  • Chose to leverage a relief aid program other than the PPP: 5%
  • Couldn’t access required payroll information: 3%
  • Couldn’t find expense records: 2%
  • Couldn’t find tax returns: 1%
  • Some other reason: 12%

Other Ways Small Businesses Are Seeking Financing

The PPP is just one source of financial support; SMBs are also pursuing other types of funding and using existing financing — especially larger SMBs.

  • 30% of SMBs overall have applied for a grant, disaster relief, or some other kind of credit.
  • Of companies with 50 or more employees, 61% have applied.
  • 24% have applied for a loan or line of credit.
  • Of companies with 50 to 500 employees, 49% have applied.
  • Of urban businesses, 36% have applied.
  • 43% have used their line of credit because of the pandemic.
  • Of companies with 50 to 500 employees, 50% have.
  • 37% have used their credit card to cover pandemic-related expenses.
  • Of companies with 50 to 500 employees, 51% have.
  • As have 47% of manufacturing firms.

Current SMB Priorities

Companies are heads down either maintaining the business they have, or looking at how to successfully reconnect with existing customers and find new audiences. SMBs’ current top priorities are:

  1. Maintaining customer relationships: 23%
  2. Managing business as usual: 21%
  3. Reducing expenses: 14%
  4. Revising our sales and marketing approach: 10%
  5. Reopening our business: 10%

Permanent Changes Include More Tech Use

With every passing week, businesses think it’ll take longer to return to “economic normal.” More than half of SMBs now think it will take seven or more months. And after businesses fully reopen, almost one in three say they’ll lean on technology more.

SMBs see the following long-term changes to their work environment as a result of COVID-19:

  • Use technology to support remote worker communication: 46%
  • More employees working at home: 41%
  • More flexible employee work schedules: 41%
  • Using tech applications more (e.g., payroll and benefits): 23%

Small Business Reopening Plans

SMBs are taking the following steps to protect their employees and customers as they reopen for business:

  • Cleaning workplaces more thoroughly/often: 47%
  • Offering limited service/capacity to keep safe social distance between customers: 38%
  • Requiring the use of PPE such as gloves and masks: 37%
  • Allowing employees to work at home: 33%
  • Providing flexible work hours: 33%

So, what’s next for SMBs? Sustaining and reopening their businesses. Some companies are adapting their business model for new markets, others are finding ways to do more with less. Across the board, determined SMBs are focused on keeping in close touch with employees, partners, vendors and customers to put forth a team effort to rebuild.

To learn more about the findings from our latest COVID-19 snap polls, read this article

* Paychex conducted four separate online surveys of 300 principals of U.S.-based businesses with 2 to 500 employees. Wave 1 was fielded April 17-20; Wave 2, April 24-27; Wave 3, May 1-4, Wave 4 May 15-17. Each survey has a +/-5.66% margin of error.

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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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