States with the Most Affected Small Businesses due to Coronavirus

Coronavirus has dealt a heavy blow to small businesses in the U.S., as many “non-essential” businesses have been forced by state governments to shut their doors until the pandemic passes. With most of the U.S. under some form of lockdown, some businesses have managed to adapt by having employees work remotely. However, many business owners have been forced to lay off staff and have watched their revenue plummet to zero.

A recent WalletHub survey found that 87 percent of small business owners say their business is hurting from the coronavirus, and 35 percent say that their business cannot last more than three months in current conditions. Businesses are more impacted by COVID-19 in some states than others, though.

In order to find out where the pandemic has caused businesses to struggle most, WalletHub compared the 50 states and the District of Columbia across 12 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. Read on for WalletHub’s ranking, along with additional commentary from a panel of experts and a full description of our methodology.

Main Findings

States with the Most Affected Small Businesses due to COVID-19

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:

1. What are the most important steps a small business can take to survive in the current conditions?
2. Will the Small Business Administration loan programs be effective enough as a response to the COVID-19 crisis?
3. 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?

Methodology

In order to identify the states where small businesses have been most affected by coronavirus, 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 12 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 affected.

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 our sample.

Impact & Access to Resources – Total Points: 60

• Share of Small Businesses Operating in Highly Affected Industries: Triple Weight (~18.00 Points)
• Share of Small-Business Employees Operating in Highly Affected Industries among Total Small-Business Employees: Triple Weight (~18.00 Points)
• Share of Consumer Expenditures Related to Highly Affected Industries: Double Weight (~12.00 Points)
  Note: This composite metrics measures the relative demand for products of COVID-affected industries, such as travel, recreation or dining-out consumer expenditures as a share of total household expenditures.
• Share of Businesses with E-commerce Sales Activity: Full Weight (~6.00 Points)
• Business Vitality: Full Weight (~6.00 Points)
  Note: This metric 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 (~8.00 Points)
• Small-Business Credit Conditions: Full Weight (~4.00 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 (~4.00 Points)
• Share of Small Businesses Receiving SBA Loans: Full Weight (~4.00 Points)

Business Environment & Workforce Support – Total Points: 20

• Small Business Friendliness Grade: Full Weight (~3.33 Points)
  Note: This metric is based on Thumbtack’s “Small Business Friendliness Survey”, which is an annual, nationwide survey that asks owner-operators of small businesses about the policy environment in which they operate.
• Small Business Policy Index: Full Weight (~3.33 Points)
  Note: The “Small Business Policy Index 2019” ranks the states according to 62 different policy measures, including assorted tax, regulatory and government spending measures.
• States with the Biggest Increase in Unemployment Due to Coronavirus Ranking: Quadruple Weight (~13.33 Points)
  Note: This metric is based on WalletHub’s “States with the Biggest Increases in Unemployment Due to COVID-19” ranking.

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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, Small Business and Entrepreneurship Council, and WalletHub research.