A Collaboration Among the 12 Reserve Banks of the FEDERAL RESERVE SYSTEM. Learn more

Businesses with no employees other than the owner often turned to personal funds in response to financial challenges during the pandemic. These nonemployers were less likely than employer firms to seek pandemic-related emergency funding and less likely to be approved.

2021 Report on Nonemployer Firms Based on the Small Business Credit Survey

The COVID-19 pandemic affected small businesses across the United States, with few escaping financial and operational challenges as a result of declines in economic activity and actions taken to reduce the spread of the virus. Among the most impacted firms were the smallest businesses—nonemployer firms—which are businesses with no employees other than the owner(s). Given nonemployers make up 81% of all small businesses in the United States, understanding the impact of the pandemic on those businesses and their ability to access emergency funding is important in assessing the overall well-being of the small business sector.

This publication focuses on the experiences of nonemployer firms in the months leading up to the pandemic and the first six months of the crisis. The report supplements the findings from the 2020 Small Business Credit Survey (SBCS) described in the Small Business Credit Survey 2021 Report on Employer Firms, which explored outcomes for businesses with 1–499 paid employees other than the owner(s). Nonemployer firms are distinct from employer firms in more than just the employment size of the business. Nonemployers are concentrated in different industries and are more likely to be owned by women and people of color. While some nonemployers are gig workers supplementing their income, a majority of the respondents in the SBCS sample reported that their firm was the primary source of income for their household, and a quarter of them planned to become employer firms within the next year.

This publication examines findings for nonemployer firms and highlights the differences in experiences between nonemployer and employer businesses. On average, nonemployer firms reported larger declines in performance in the 12 months preceding the survey than employer firms, and nonemployers also more often struggled to access the funding necessary to keep their businesses afloat. This report also underscores the importance of revenue size: Nonemployer firms with $100,000 or less in annual revenues faced more challenges and worse outcomes than larger-revenue nonemployers, which often reported conditions similar to those of smaller-revenue employer businesses.