48. United States

The US economy was strongly impacted by the COVID-19 pandemic in 2020. The demand shock that resulted from the introduction of lockdowns, voluntary social distancing and business closures resulted in a strong contraction in economic growth. In Q2 of 2020, GDP declined by 9.1%, the highest contraction in quarterly GDP since tracking began in 1947. Despite some recovery in the second half of the year, annual GDP declined by 3.5%. The pandemic also had a significant impact on the labour market: the US unemployment rate shot up by 10.4 percentage points from March to April 2020, reaching a record high of 14.3%. This figure gradually declined to 6.7% at the end of the year and has since nearly recovered to pre-crisis levels.

The impact of the crisis on SMEs was significant. Lockdowns led to depressed demand, business closures and disruptions in supply chains that strongly impacted SME operations, revenues and liquidity. In the US Census Bureau’s Small Business Pulse Survey, nearly 90% of small businesses reported a large or moderate negative impact of the pandemic in the end of April 2020. Over this period, more than 70% reported a decline in operating revenues, over 40% of business reported temporary closures, and more than 40% noted supply chain problems. During the same period, 75% of surveyed enterprises had requested government assistance through the Paycheck Protection Program (PPP) (see more below). These impacts prevailed through most of the second quarter of 2020 and gradually declined in the second half of 2020 as the recovery began to take shape.

Lending conditions tightened in the first six months of the crisis, but the demand for credit also declined considerably due to significant recourse to the PPP scheme (see more below). The Federal Reserve loosened monetary policy by lowering the federal funds rate by 50 basis points in March 2020 to a target range of 0 to 0.25%. However, the heightened uncertainty over the evolution of the pandemic and its economic impact led to considerable tightening of lending conditions in Q2 and Q3, as noted in the Senior Loan Officer Survey. The October 2020 showed that a large proportion of banks indicated an increase in the use of interest floors, collateralisation requirements, loan covenants and premiums charges on riskier loans, as a result of a perception of a more uncertain outlook and worsening of industry-specific problems. However, in both survey rounds, many bank officials reported a weaker demand for corporate credit.

Government support programmes were critical in limiting the economic fallout from the crisis. 2020 saw an historic increase in government-backed financing to SMEs. The Paycheck Protection Program (PPP) provided an additional 5.2 million in forgivable loans worth more than USD 525 billion through August 2020. The programme has since been extended twice, with the latest extension in January 2021. The SBA’s Economic Injury Disaster Loan (EIDL) Program added another 3.6 million small business loans valued at USD191 billion, as well as an additional 5.7 million EIDL Advances worth USD 20 billion. Loans guaranteed through traditional SBA lending programs exceeded USD28 billion in Fiscal Year 2020. These programs account for the declining interest rates and interest rate spreads between SMEs and large enterprises and the large decline in the share of SMEs requiring collateral to obtain a loan, despite the crisis (see Table 48.1). They also likely play a role in the decline in bankruptcies relative to 2019 (see Table 48.1).

Venture Capital in 2020 registered a record high in total capital raised, with a growth of 13% compared to 2019, even if the number of deals was slightly lower than the equivalent 2019 figure. When looking by stages, early stage financing was more adversely affected by the crisis with seed and angel number of deals registering a decline of 11%, and early VC deals declining by 20%. In terms of total capital raised, early VC was particularly affected, closing the year with a decline of 11%, while seed and angel closed the year with a 1% increase.

The SBA broadly classifies small businesses as any firm with 500 or fewer employees1. These firms account for about 32 million businesses, or 99.9% of all firms. They employ about 48% of the private sector employees, pay about 41% of the total private sector payroll and produce about 33% of identified goods exports. In addition, they generate about 62% of net new private sector jobs.

Net formation of employer firms have grown modestly since 2012. Notwithstanding this recovery, as of 2015 employer firms stood at 5.9 million, some 145 000 or 2.5% lower than their peak 2007 level. Employer SMEs experienced a similar 2.5% decline during the same period. Data from the Bureau of Labor Statistics point to a continued growth of employer firms and employer SMEs, with the 2016 and 2017 levels surpassing the peak 2007 levels2.

Funding to SMEs increased significantly in 2020, largely thanks to government-guaranteed loans through the PPP, the Economic Injury Disaster Loan (EIDL) Programs and traditional SBA programs such as 7(a) and 504 loan programs (see the section on Government policy response). However, despite the large increase in governmental support including a surge in government guaranteed lending, index data on new SME lending do not register a large growth in loan origination (Table 48.1) due to the fact that most loans extended through the PPP were forgiven under the terms of the programme (mainly through fulfilment of the condition of retained employment) (Figure 48.1). Other programs such as the Debt Relief Program forgave up to eight months of principal and interest payments of 7(a) and 504 microloans, benefiting particularly SMEs in hard-hit sectors such as food service, accommodation, and entertainment and recreations (SBA.com, 2021[1]).

The stock of outstanding loans to SMEs increased sharply in 2020 driven in part by new lending as well as the introduction of other liquidity support measures, such as debt moratoria. Data from the Federal Deposit Insurance Corporation (FDIC)3 show an increase of 29% y-o-y amounting to USD 833 billion in 2020 from USD 645 billion registered in 2019. This sharp increase in the stock of loans to SMEs, exceeds significantly the one registered in 2008, when the stock of SME loans increased by 3.6% and reached USD 711.5 billion. (FEDERAL RESERVE BANK OF KANSAS CITY, 2021[3]). In 2020, the sharp rise in the outstanding stock of loans is driven by the debt moratoria option both in the Disaster Loan Scheme and in PPP loans, which helped business obtain deferrals for existing loans so they could stay solvent during the crisis. In the PPP scheme, through the Flexibility Act, loans were deferred to the date that SBA remits the forgiveness amount to the borrower, or if the borrower does not apply for loan forgiveness, six months after the end of the borrower’s loan forgiveness covered period. Looking forward, it is likely that the outstanding stock of loans will continue to increase considering the extension of the deferral period to ten months of PPP loans that were not forgiven (Treasury, 2021[4]).

Lending conditions tightened in the first six months of the crisis, but the demand for credit also declined. The Fed loosened monetary policy by lowering the federal funds rate by 50 basis points in March 2020 to a target range of 0 to 0.25%. However, the heightened uncertainty over the evolution of the pandemic and its economic impact led to considerable tightening of lending conditions in Q2 and Q3 as noted in the Senior Loan Officer Survey. In the survey conducted in October 2020, a large proportion of banks indicated an increase in the use of interest floors, collateralisation requirements, loan covenants and premiums charges on riskier loans, as a result of a perception of a more uncertain outlook and worsening of industry-specific problems. However, in both survey rounds, many bank officials reported a weaker demand for corporate credit.

Despite the COVID-19 pandemic, in 2020 venture capital registered a record high in total capital raised and was a little bit below 2019 in terms of number of deals. In terms of total capital raised, VC investments registered a growth of 13% compared to 2019 reaching a total amount of USD 156.2 billion. The total numbers of deals declined 10% at 11,024 deals Figure 48.2.

In terms of number of deals by stages, seed, angel and early stage were hit hard during the pandemic. Seed and angel closed the year with a decline of 11%, while early VC closed the year with a decline of 20%, as opposed to late stage that registered a growth of 4% (Pitchbook and NVCA, 2021[5]). This is explained by the disruption of lockdown measures on the process of closing deals. This process has traditionally been dependent on in-person meetings and connections, as start-ups and young innovative SMEs often do not have readily available financial metrics or finished products.

Similarly, the total amount of capital raised in early stages was also affected by the COVID-19 pandemic and particularly hit hard early-stage VC. While in 2019 early stage VC closed the year with a total capital raised of USD 47.2 billion, in 2020 the total capital raised reached USD 41.8 billion. In contrast, seed and angel was not as affected, and closed 2020 with a slight increase in total capital raised compared to 2019.

Pre-money valuations in early stages were also affected as a result of the crisis, particularly in seed which is high-risk and vulnerable in economic downturns. This stage was the only one to register a decline in the median pre-money valuation from 2019. In fact, 2020 marked the first time seed valuations declined since 2009.

Total bankruptcy filings have been on a continuous decline since the 2011, and business bankruptcies started their continuous decline a year earlier. In 2020, the number of bankruptcies declined by 4.9% compared to the previous year, explained in part by closures in bankruptcy courts.

Available data on business loans in general and small business loans specifically indicate that loan performance has experienced strong and broad-based improvements, with delinquency rates at or near historical lows: 31-90 days delinquency rates hovered at the 1.0-1.5% range, and 91-180 delinquency rates remained below 0.5%. In 2020, the share of SME non-performing loans increased, but only marginally (from 1.6% to 1.9% of total loans).

The SBA works with approximately 5 000 banks and credit unions, some 250 Community Development Corporations (CDCs), over 170 non-profit financial intermediaries and Community Development Financial Institutions (CDFIs), and approximately 300 small business investment companies (SBICs). The SBA Office of Capital Access has several programs that provide direct loans and loan guarantees for a wide range of products designed to meet the diverse financial needs of small firms throughout their life cycle, starting from small start-ups to established firms.4

The largest of these programs, the 7(a) Loan Program, provides loan guarantees for working capital loans up to USD 5.0 million to new and existing small businesses. The second largest program, the CDC/504 Loan Program, provides loan guarantees for loans up to USD 5.0 or USD 5.5 million used for the purchases or construction of fixed assets. In 2020, the SBA provided USD 7.8 billion in debt relief to 7(a) loan, 504 loan, and Microloan borrowers (SBA, 2021[6]).

In 2020, and as a result of the liquidity shock caused by the COVID-19 crisis, the SBA swiftly lent support to small businesses. The SBA Economic Injury Disaster Loan (EIDL) Programme, which existed prior to the pandemic to benefit businesses directly affected by a disaster, was swiftly used to address the adverse economic impact of COVID-19 on SMEs. In March 2020, under the Coronavirus Preparedness and Response Supplemental Appropriations Act, the coronavirus was deemed to be a disaster under the EIDL allowing small businesses to apply to this programme and the newly established EIDL Advance programme (SBA, 2020[7]). The SBA provided EIDL Advances and approved nearly 3.7 million EIDL loans for USD 194 billion, more than all combined prior disaster assistance lending supported in the Agency’s history. The SBA exhausted its USD 20 billion EIDL Advance appropriation on July 15, 2020, which supported nearly 5.8 million EIDL Advances. The SBA provided USD 240 million in grants to Small Business Development Centres and Women’s Business Centres to help small businesses retool their operations and recover (SBA, 2021[6]).

. In late March, the Treasury implemented the Coronavirus Aid, Relief and Economic Security (CARES) programmes. The CARES Act, and subsequent legislation, provided the SBA with nearly USD 1 trillion—the largest outlay of capital in the Agency’s history. Some of the programmes include USD 562 million to support disaster loans (Congressional Research Service, 2021[8]), USD 221 billion in tax reductions and deferrals. These include a 50% of payroll tax credit for severely affected businesses that do not benefit from business interruption loans and agree to maintain employment levels.

Under the CARES Act, the SBA launched the Paycheck Protection Program (PPP) as a central piece of the US COVID-19 policy response. An initial amount of USD 349 billion was made available through no-interest loans of up to USD 10 million for small businesses. The principal on these loans used for working capital for eight weeks was forgiven if the business maintained pre-crisis employment levels. In winter 2020, the PPP was renewed for USD 284 billion for small businesses. The new round of PPP included a new streamlined process for writing off PPP loans. The bill simplified forgiveness for loans of USD 150,000 or less, allowing businesses to attest on a one-page form that they used the funds for payroll and other eligible businesses expenses. It also allows those expenses to qualify for deductions, simplifying tax returns for millions of borrowers. In FY 2020, the SBA guaranteed 5.2 million PPP loans totalling USD 525 billion through 5,460 lenders (SBA, 2021[6]).

In early 2021,Congress passed the American Rescue Plan Act amounting USD 1.9 trillion, including USD 15 billion in new Targeted Economic Injury Disaster Advance Loan payments as well as USD 28.6 billion in grants for restaurants affected by COVID-19 closures. The government also introduced changes to the PPP, to provide better access to small and minority businesses by giving them a head start, and reserved USD 1 billion for support for sole-proprietors. Other amendments to the PPP include expanding eligibility to non-profits and adding a further USD 7.25 billion to the programme.

The Department of the Treasury has also played a significant role in bolstering Community Development Financial Institutions (CDFIs) and other lenders that support SMEs through the Emergency Capital Investment Program (ECIP). Established by the Consolidated Appropriations Act, 2021, ECIP is authorized to provide up to USD 9 billion in capital to CDFIs and minority depositary institutions (MDIs) that will allow them to expand loans, grants, and forbearances for eligible SMEs and consumers, particularly those in minority communities. The Treasury will set aside USD 2 billion for CDFIs and MDIs with less than USD 500 million in assets and an additional USD 2 billion for CDFIs and MDIs with less than USD 2 billion in assets. As of October 2021, 204 eligible institutions have applied for ECIP assistance (U.S. Department of the Treasury, 2021[9]).

The Minority Business Development Agency (MBDA) is an agency of the United States Department of Commerce and is the only federal agency solely dedicated to fostering the growth and global competitiveness of U.S. minority business enterprises. MBDA funds a nationwide network of Business Centers, Export Centers, Advanced Manufacturing Centers, and a Federal Procurement Center. These centres provide the United States’ 11 million minority-owned businesses with a range of services, including Access to Capital, Access to Contracts, and Access to Markets.

For its Access to Capital program, MBDA leverages partner institutions and connects minority businesses with national and local resources. MBDA’s strategic partners include the Small Business Administration (SBA), Export-Import Bank of the United States (Exim), the Federal Depository Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and Community Development Financial Institution (CDFI) Fund. MBDA Business Centers assist minority businesses in securing traditional and non-traditional capital from institutions like banks, credit unions, state and local economic development authorities, venture capital, and private equity.

In Fiscal Year 2019, MBDA invested about USD 20 million in its programs, helping its clients secure over USD 1.7 billion in financing and USD 3.1 billion in contracts, for a total of USD 4.8 billion of transactions.

As a response of the COVID-19 crisis, the MBDA deployed USD 10 million in CARES Act funding to the network of Business Centers and national minority chambers of commerce. The grants were used for education, training, and advising small and minority business enterprises. The funding was provided for a 12 month period from June 2020 to May 2021.


American Bankruptcy Institute


Board of Governors of the Federal Reserve System, Senior Loan Officer Opinion Survey on Bank Lending Practices


Board of Governors of the Federal Reserve System, Survey of Terms of Business Lending - E.2


Census Bureau


Federal Deposit Insurance Corporation, Call Reports


Federal Reserve Bank of Kansas City, Small Business Lending Survey


National Federation of Independent Business (NFIB), Small Business Economic Trends.


National Venture Capital Association


Thomson Reuters, Thomson Reuters Indices, Paynet Small Business Lending index


U.S. Congress, Small Business Act of 1953


U.S. Department of Commerce, Minority Business Development Agency, 2019 Annual Performance Report

(forthcoming January 2020)

U.S. Department of Commerce, US Census Bureau, County Business Patterns


U.S. Department of Commerce, US Census Bureau, Nonemployer Statistics


U.S. Department of Commerce, US Census Bureau, Profile of US Importer and Exporter Companies


U.S. Department of Commerce, US Census Bureau, Statistics of U.S. Businesses (SUSB)


U.S. Department of Labor, Bureau of Labor Statistics, Business Employment Dynamics


U.S. Small Business Administration (2009) SBA Size Standard Methodology


U.S. Small Business Administration, Frequently Asked Questions


U.S. Small Business Administration, Quick Reference to SBA Loan Guarantee Programs



← 1.

← 2. See U.S. Bureau of Labor Statistics, Business Employment Dynamics, Table G <https://www.bls.gov/web/cewbd/table_g.txt >.

← 3. The data considers loans for Commercial Real State (CRE) and Commercial and Industrial (C&I) of up to USD 1 million.

← 4.

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