Smbliq B 031 Small Business Outlook 2020 04
Summary
The Visa Business and Economics Insights Small Business Outlook for Spring 2020, which reports Visa's Small Business Health Indexes and a national survey of small business owners on the effects of COVID-19. It states that small business spending declined sharply in Q1, that outstanding balances on Visa business credit cards dropped 2.6 points, and that delinquencies and charge-offs rose. The survey, fielded April 16-24, 2020 by Kelton, found 45 percent of small businesses at risk of closing and 5 percent anticipating closure. It reports cost cutting, layoffs, remote work and new technology tools, and that 81 percent said flexible payment options would help them stay afloat. The report includes a methodology section, disclaimers and quotations from Visa's chief economist.
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Visa Business and Economics Insights
Small Business Outlook
Spring 2020
Visa’s proprietary Small Business Health Indexes and a nation-wide survey of small business
owners show early signs of America’s small businesses feeling the pain of COVID-19
Small businesses were hit hard in Q1 by the pandemic, and it may be just the beginning
“Small businesses are facing
unprecedented challenges due to the • Small business spending declined sharply in Q1 as the uncertainty of the health crisis unfolded and sales plummeted due to
COVID-19 pandemic. While Congress stay-at-home orders. States are beginning to open up, with restrictions gradually being lifted in most places.
has enacted large SBA-led lending • Outstanding balances on Visa business credit cards dropped 2.6 points, but may increase as lost revenues kick in and borrowing
programs, the loss of demand due to becomes more necessary. Risk, on the other hand, ticked up with increases in both delinquencies (+3.3) and charge-offs (+6.6).
widespread stay-at-home orders has left Whether federal assistance programs and forbearance regulations can help stem the tide remains to be seen.
most small businesses in a very • Half of small businesses were either at risk of closing (45 percent) or anticipated they would need to close (5 percent) because of
precarious position.” the COVID-19 pandemic, according to a Q1 survey conducted by Kelton Global on behalf of Visa. Most small businesses are
Wayne Best looking for assistance to stay afloat, either through flexible payment options (81 percent), relief from debt payments (78
Chief Economist, Visa Inc. percent), or access to loans (73 percent).
Small Business Health Indexes: Based on proprietary Visa small business card data
Small Business Spending Index Small Business Borrowing Index Small Business Risk Index
Payment volume on Visa business credit cards,* Outstanding balances on Visa business credit Delinquencies and charge-offs on Visa business
indexed to Q1-2013 cards,* indexed to Q1-2013 credit cards,** indexed to Q1-2013
240 125
110
200 115 90
160 Charge-offs
105 70
120
80 95 Delinquencies
50
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
*Payment volume and balances per active account. See methodology notes on page 2 for more details | **Percent of balances delinquent and charged-off. See methodology notes on page 2 for more details ©Visa 2020
Disclosures:
Disclaimer
Case studies, research and recommended practice recommendations are intended for informational purposes only and should not be relied upon for marketing, legal, technical, tax, financial or other
advice. When implementing any new strategy or practice, you should consult with your legal counsel to determine what laws and regulations may apply to your specific circumstances The actual costs,
savings and benefits of a card program may vary based upon your specific business needs and program requirements. Visa makes no representations and warranties as to the information contained herein
and member is solely responsible for any use of the information in this presentation in connection with its card programs.
Forward-looking statements
This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are generally identified by words such as “outlook,”
“forecast,” “projected,” “could,” “expects,” “will” and other similar expressions. Examples of such forward-looking statements include, but are not limited to, statements we make about Visa’s business,
economic outlooks, population expansion and analyses. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not
guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. Studies, survey results, research,
recommendations, opportunity assessments, claims, etc. (the “Statements”) should be considered directional only. The Statements should not be relied upon for marketing, legal, regulatory or other advice.
The Statements should be independently evaluated in light of your specific business needs and any applicable laws and regulations. Visa is not responsible for your use of the Statements, including errors of
any kind, or any assumptions or conclusions you might draw from their use.
Methodology
Except were otherwise noted, statements herein are based on:
• Visa Small Business Health Indexes, based on proprietary Visa data and calculated as follows:
• Spending Index: Changes in spending per spend-active small business credit card account.
• Borrowing Index: Changes in balances per balance-active small business credit card account.
• Risk Index: Changes in share of balances delinquent and balances charged-off in a quarter on Visa small business credit cards.
All indexes use Q1-2013 as their base period.
• The national small business survey of approximately 1000 small business owners, administered by Kelton once per quarter. The spring survey was fielded April 16-24, 2020.
For any further questions on this report please contact your Visa Account Executive.
©Visa 2020
Visa Small Business Outlook
COVID-19 Impact: The impact of COVID-19 on small businesses is significant, and its
effects are becoming increasingly tangible.
Making cuts to stay in business
Most small businesses have felt the impact of the COVID-19 pandemic Struggling small businesses have reduced workforces and spending to try to
remain afloat
Nearly all small businesses (83 percent) report that they have been impacted in some way by the
COVID-19 pandemic, with half of small businesses saying they were either at risk of closing (45 Three-fifths of small businesses (60 percent) have decreased spending overall whether they have
percent) or anticipated they would need to close (5 percent) because of COVID-19. directly felt a negative impact from the COVID-19 pandemic or not. Among those who have been
negatively impacted, more than one-quarter (27 percent) have had to, or are planning to, lay off
employees. Reducing operational costs (42 percent) and decreasing marketing spend (33 percent) are
COVID-19 impact on small businesses other ways that they have cut back on budget.
4%
5%
Small businesses are cutting costs by: Small businesses who have had to lay-off
My business will close (Among those negatively impacted by COVID-19) employees (by number of employees):
(Among those negatively impacted by COVID-19)
My business will be at risk of closing
46% 45% My business won’t face any 42%
noticeable economic changes
33%
My business will expand 1-10 employees 22%
27%
11-20 employees 30%
Millennial owners (17 percent) were more likely than Gen X owners (2 percent) and boomer 21+ employees 34%
owners (4 percent) to say their business will close.
Reducing Decreasing Employee
operational marketing layoffs
Small businesses that have been in business for more than 15 years were more likely than those
who have been in business for 15 years or less to say their business will not face any noticeable costs spend
economic changes (55 percent vs. 38 percent)
Visa Small Business Outlook
COVID-19 Impact: Small businesses are taking action to combat the effects of
COVID-19 and find ways to keep employees working effectively.
Changing operational methods
Small businesses update policies and technology in order to stay in Some small businesses introduce technology tools they haven’t previously
operation used as a result of COVID-19
Over half of small businesses (55 percent) have changed internal business practices, such as Two-fifths (40 percent) have either begun using or plan to use virtual meeting software as a result of the
avoiding unnecessary meetings. Among small businesses that have been negatively impacted by pandemic. Over a quarter (26 percent) have either begun or intend to begin using virtual communication
COVID-19, nearly half (47 percent) have allowed employees to work from home. tools, while 21 percent say the same about collaboration tools.
Technology tool introduction
Small businesses with more than 10
employees are more likely than those
with fewer to have changed internal
75% business polices as a result of the Collaboration resources/software 38% 12% 9% 41%
pandemic (60 percent vs. 52 percent).
Among those negatively impacted,
small businesses with revenues over Virtual communication tools 25% 17% 9% 49%
Three in four small businesses $1M are more likely than those with
(75 percent) report some type less to have allowed employees to
of day-to-day changes work from home (59 percent vs. 37
percent). Virtual meeting software 27% 32% 8% 33%
Small businesses allowing WFH (by annual revenue):
(Among those negatively impacted by COVID-19)
69% Used prior to COVID-19 Began using as a result of COVID-19
57%
31% 39%
Plan to start using as a result of COVID-19 Don’t use/don't plan to use
Less than $100k $100k-<$1M $1M-<$5M $5M-<$10M
Visa Small Business Outlook
COVID-19 Impact: Small businesses are seeking information and guidance from third
Requesting third party help parties to navigate the impacts of COVID-19
“While COVID-19 has created significant Small businesses are looking for assistance from Compared to small businesses with 20 employees or less,
challenges for small businesses, they third parties businesses with more than 20 employees are more likely to
continue to seek guidance and support welcome help from third parties in the following areas (by share
from third parties to recover. Working More than four-fifths of small businesses (81 percent) say that
across the ecosystem, we can identify
of small businesses with 20+ employees):
flexible payment options by third parties would help them to stay
opportunities to partner and create new afloat during the COVID-19 pandemic, with most (78 percent) saying
paths forward to help them survive and relief from debt payments or expenses, and access to loans (73
thrive.” percent) would be helpful. In fact, over two-fifths of small businesses
David Simon
Global Head of Small and Medium
(41 percent) who have been negatively impacted by COVID-19 have
already applied for emergency funding. 71% 64%
Relevant reading Information on how to
Businesses, Visa Inc.
materials/resources market business online
(vs. 52 percent) (vs. 50 percent)
How third parties can help small businesses stay afloat during COVID-19:
81%
65% 55%
78%
73%
57% 54% 54% Educational resources Help business to
(e.g., financial planning) start selling online
41% (vs. 50 percent) (vs. 37 percent)
Small businesses who have been in business for 20 years
or less are more likely than small businesses who have
Flexible Relief for debt Access Relevant Educational Information on Help my been in business longer to say flexible payment options by
third parties (85 percent vs. 74 percent) and relief for debt
payment payment or to loans materials/ resources how to market business
payments or expenses (83 percent vs. 71 percent) would
options expenses resources my business start selling
help them stay open through the pandemic.
online online
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