Coronavirus dealt a heavy blow to small businesses in the U.S., as countless businesses were forced by state governments to shut their doors for months on end or have heavy capacity restrictions. Though states are gradually reopening and loosening restrictions, around 100,000 businesses shut their doors permanently in 2020. Businesses in some states have been more resilient than others, though.
In order to find out where small businesses have the greatest potential to bounce back after the COVID-19 pandemic, WalletHub compared the 50 states and the District of Columbia across 11 key metrics. Our data set ranges from the share of small businesses operating in high-risk industries to small-business credit conditions and the state’s small-business friendliness.
States With the Most Pandemic-Proof Small Businesses
Impact & Access to Resources
Small-Business Financial Conditions
Business Environment & Workforce Support
|11||District of Columbia||66.44||3||51||31|
Note: With the exception of “Total Score,” all of the columns in the table above depict the relative rank of that state, where a rank of 1 represents the best conditions for that metric category.
Ask the Experts
It’s natural for business owners to be worried during the COVID-19 pandemic. In order to provide insight on what they, and governing authorities, can do to weather the crisis, WalletHub turned to a panel of experts. Click on the experts below to read their bios and see their responses to the following key questions:
- What are the most important steps a small business can take to survive in the current conditions?
- Will the Small Business Administration loan programs be effective enough as a response to the COVID-19 crisis?
- What will be the long-term implications to small business as a result of the COVID-19 crisis? Are the current measures enough to mitigate the impact?
- According to a recent survey, 55% of small businesses expect long-term challenges caused by the pandemic. Will the 2021 COVID-19 relief packages aid still-struggling small businesses?
Ask the Experts
In order to identify the states with the most pandemic-proof small businesses, WalletHub compared the 50 states and the District of Columbia across three key dimensions, “Impact & Access to Resources,” “Small-Business Financial Conditions” and “Business Environment & Workforce Support.”
We evaluated those dimensions using 11 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most pandemic-proof.
We then determined the weighted average across all metrics to calculate an overall score for each state and the District. We then used the resulting scores to rank-order the states.
Impact & Access to Resources – Total Points: 60
- Share of Small Businesses Operating in Highly Affected Industries: Triple Weight (~22.50 Points)
- Share of Small-Business Employees Operating in Highly Affected Industries among Total Small-Business Employees: Triple Weight (~22.50 Points)
- Percent Change in Number of Small Businesses Open: Full Weight (~7.50 Points)
- Business Vitality: Full Weight (~7.50 Points)
Note: This metrics measures the 1-year survival rate of private sector establishments.
Small-Business Financial Conditions – Total Points: 20
- Average Annual Federal Small-Business Funding per GDP: Double Weight (~6.67 Points)
- Small-Business Credit Conditions: Full Weight (~3.33 Points)
Note: This composite metric includes:
- Average Interest Rate on SBA Loans
- Share of Small Business Loans and Leases to Small Business that Have Defaulted in the Past 12 Months
- Share of Loans to Small Businesses that are more than 30 Days Past Due but Less than 91 Days Past Due
- Total Amount of Small-Business Loans per Small-Business Employee: Full Weight (~3.33 Points)
- Share of Small Businesses Receiving SBA Loans: Full Weight (~3.33 Points)
- Share of Small Businesses Who Received Financial Assistance from Paycheck Protection Program (PPP): Full Weight (~3.33 Points)
Business Environment & Workforce Support – Total Points: 20
- Small Business Friendliness Grade – “State Response to COVID-19” Grade: Full Weight (~4.00 Points)
Note: This metric is based on Thumbtack’s “Small Business Friendliness Survey: Special COVID-19 Edition,” which is a nationwide survey that asks owner-operators of small businesses how they perceive local, state, and federal governments are responding to the pandemic.
- WalletHub’s "States Whose Weekly Unemployment Claims Are Recovering the Quickest" Score: Quadruple Weight (~16.00 Points)
Note: This metric is based on WalletHub’s “States Whose Weekly Unemployment Claims Are Recovering the Quickest” ranking.
Sources: Data used to create this ranking were collected from U.S. Census Bureau, Bureau of Labor Statistics, National Science Foundation, SBALenders.com, PayNet, U.S. Small Business Administration, Thumbtack, Raj Chetty, John N. Friedman, Nathaniel Hendren, Michael Stepner, and the Opportunity Insights Team and WalletHub research.