Small business owners (SBOs) report they are doing better than expected as the economy continues to gain steam amid the waning pandemic, according to the results of the 2021 Small Business Survey, released by TD Bank. The survey polled more than 750 small businesses nationwide with less than $5 million in annual revenue, from sole proprietors with home-based businesses to professional services and retail. It showed that 41 percent of SBOs expect to grow their revenue in 2021 while only 9 percent anticipate a decline.

What's more, 57 percent expect to expand hours and/or operations and 9 percent will add a business location in the next 12 months. Main Street may not see as many vacancies in 2021 as predicted: just 3 percent of SBOs anticipate closing permanently in the next year and only 2 percent plan to sell their business. Despite their cautious optimism, respondents identified the national economy (43 percent), COVID-19 and associated operational restrictions (41 percent) and a decrease in revenue or sales (39 percent) as their top challenges in the year ahead.

Eyeing Expansion Over Extinction
Most SBOs have not been deterred amid the pandemic, with 37 percent considering expanding product lines and services to grow business revenue or increase profits.

The future of jobs is also looking up, with nearly three-in-four (73 percent) respondents anticipating that their employee base will stay the same and 16 percent anticipating their number of employees will grow. This finding is aligned with national unemployment figures, which have recently dipped to 6 percent.

"COVID-19 required small businesses to adapt to new business operations and incorporate new revenue-generating strategies nearly overnight," said Jay DesMarteau, Head of Commercial Distribution, TD Bank. "Entrepreneurs are incredibly resilient, though, and it is encouraging that they report a more positive outlook and do not anticipate losing their livelihood."

Government Aid Helpful, But More Needed
When asked about the effectiveness of government programs like the U.S. Small Business Administration's (SBA) Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL), two-thirds of SBOs (66 percent) stated that these programs provided necessary funding for small businesses or were helpful, but need more funding allocated to the programs to really make an impact.

Twenty-one percent of respondents took advantage of the PPP prior to March 2021, when the study was fielded, with nearly half of SBOs in Gen Z and younger millennials (ages 18 to 34) more likely to apply for these programs compared with just 11 percent of those 55 and older.

Cautious but Confident
The survey also highlighted some trends that provide a snapshot of how SBOs are running their businesses against the backdrop of the pandemic.

Although COVID-19 brought financial challenges, 78 percent of respondents are still most confident in handling the finances and accounting for their business. Other areas where business owners expressed confidence were:

•     Opting to use digital/online banking features (76 percent)
•     Managing their employees and human resources needs such as when to hire (74 percent)
•     Knowing when to seek additional credit or financing (66 percent)
•     Knowing how to grow their business (63 percent)

Despite the pandemic serving as a catalyst for the surge of contactless payment solutions and SBOs' growing reliance on digital and online banking features, a surprising 66 percent of respondents still process payments by collecting checks and cash, making these physical transactions the most popular payment method. One-third of respondents use person-to-person payments like Zelle or Venmo, eCommerce/Online sites (28 percent) or electronic transfer such as ACH payments (28 percent.) Just 19 percent report using a traditional Point of Sale (POS) system.

The Facts on Future Finance Needs
When considering finances, 58 percent of respondents have no loan or line of credit needs, although one in three applied for a loan – including PPP – or line of credit in the past 12 months. This is higher than 2019, when just 20 percent of businesses had applied for a loan or line of credit and 62 percent had no credit needs, showing COVID-19's impact on business owners' need or desire to have access to capital when needed.

Looking ahead, only 14 percent said they would apply for a loan or line of credit in the next year. A majority of SBOs are saying "charge it," however, with 60 percent reporting they have a credit card to cover business purchases and 42 percent use cash back or other credit card rewards to fund critical expenses.

"Although funding programs like PPP provided much-needed stimulus for small businesses, there is a sense of caution about taking on new debt this year. Business owners should speak with their banker to understand the benefits and risks related to various credit products and better understand how credit could potentially accelerate growth," DesMarteau said.