TD Bank Survey Shows 41% of Small Business Owners Expect Revenue Growth in 2021

Small business owners (SBOs) reported they are doing better than expected as the economy continues to gain steam amid the waning COVID-19 pandemic, according to the results of TD Bank’s 2021 small business survey. The survey polled more than 750 small businesses with under $5 million in annual revenue. The survey showed that 41% of SBOs expect to grow their revenue in 2021, while only 9% anticipate a decline.

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

Expansion Over Extinction

Most SBOs have not been deterred during the pandemic, with 37% considering expanding product lines and services to grow business revenue or increase profits.

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

“COVID-19 required small businesses to adapt to new business operations and incorporate new revenue-generating strategies nearly overnight,” Jay DesMarteau, head of commercial distribution at TD Bank, said. “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 Paycheck Protection Program and Economic Injury Disaster Loans (EIDL), 66% of SBOs stated that these programs provided necessary funding or were helpful for small businesses but that more funding needed to be 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 Gen Z and younger millennial SBOs (ages 18 to 34) likely to apply for these programs compared with just 11% of those of ages 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 COVID-19 pandemic.

Although the pandemic brought financial challenges, 78% of respondents are still 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%)
  • Managing their employees and human resources needs, such as when to hire (74%)
  • Knowing when to seek additional credit or financing (66%)
  • Knowing how to grow their business (63%)

Despite the pandemic serving as a catalyst for the surge of contactless payment solutions and SBOs’ growing reliance on digital and online banking features, 66% 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, while 28% use e-commerce/online sites and 28% use electronic transfer such as ACH payments. Just 19% reported using a traditional point of sale system.

The Facts on Future Finance Needs

When considering finances, 58% of respondents have no loan or line of credit needs, although one in three applied for a loan — including from the PPP — or line of credit in the past 12 months. This is higher than 2019, when just 20% of businesses had applied for a loan or line of credit and 62% had no credit needs, showing the COVID-19 pandemic’s impact on business owners’ needs or desire to have access to capital when needed.

Looking ahead, only 14% of respondents 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% reporting they have a credit card to cover business purchases, while 42% 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.

The study was conducted from March 12 to March 19 among a representative group of 754 U.S. small business owners with under $5 million in annual revenue. The survey was hosted by research company MARU/Matchbox.

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