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2022 Report on Nonemployer Firms: Based on the 2021 Small Business Credit Survey

Nonemployer firms—that is, businesses with no employees other than the owner(s) of the business—are an important piece of the US economy, accounting for approximately four in five small businesses and $1.3 trillion in sales. 

Yet, as demonstrated in previous Small Business Credit Survey (SBCS) reports, nonemployer firms are more likely to experience financial challenges and difficulties accessing financing than firms with employees (employer firms); these trends were only exacerbated by the COVID-19 pandemic. This publication uses 2021 SBCS data to explore the experiences of nonemployer firms and highlight findings around firm performance and access to funding.

While revenue performance numbers improved between the 2020 and 2021 surveys, evidence of persisting financial difficulties among nonemployers showed in the 2021 data. The share of nonemployer firms reporting financial challenges increased. Despite improvements in 2021 revenues versus 2020, well over half of nonemployers reported that revenues at the time of the 2021 survey were still lower than in 2019. Findings indicate there were notable gaps in revenue performance between smaller nonemployer firms (that is, nonemployer firms with less than $100,000 in annual revenues) and their larger-revenue counterparts; in fact, smaller nonemployer firms were more than twice as likely as larger nonemployers to report that they were in poor financial condition.

Many pandemic-related financial assistance programs were available in 2021 to help small businesses cope with the financial effects of COVID-19. Earlier in 2021, policymakers made significant changes to the Paycheck Protection Program (PPP) to ensure that the smallest businesses could access the funds. Still, the SBCS found that just half of smaller nonemployer firms applied for PPP funding in 2020 or 2021, and among those smaller nonemployer firms that applied in 2021, less than half received the full amount they sought. Similarly, when smaller nonemployers applied for traditional financing such as loans or lines of credit, they were around half as likely as larger nonemployers to receive all that they needed. However, nonemployer firms of all sizes had challenges accessing financing, as just 29% ultimately reported having their financing needs met.

This report highlights SBCS data that show that nonemployer firms largely have yet to recover from the effects of the pandemic, and that financing remains difficult for these firms to access. Importantly, the data show that those trends are particularly evident among smaller nonemployer firms.

Suggested Citation

“2022 Report on Nonemployer Firms: Based on the 2021 Small Business Credit Survey.” 2022. Small Business Credit Survey. Federal Reserve Banks.

The views expressed here are those of the authors and not necessarily those of the the Federal Reserve Banks. Data used in this report may be subject to updates or changes.