If You Own a Business It May Be Struggling if You Are Older Than 45

The Federal Reserve Bank of New York, in collaboration with AARP, today released a report, State of the Older Entrepreneur During COVID-19 that finds a sharp decrease in active business ownership among the 80% of small firm owners who are 45 and older.

The report finds active business ownership for white owners 45 and older declined 8% for the yearlong period that ended in January 2021. The decline for Asian owners in the same age group was more than twice as steep, at 19%. The drop was 16% for Black owners and 11% for Latinos.

The report incorporates interviews with small business owners from the AARP’s Supporting Small Business Owners 50+ report and draws on data sources including the Census’ Current Population Survey, the Federal Reserve’s Survey of Consumer Finances, and Federal Reserve Banks’ 2020 Small Business Credit Survey, which was fielded in the third and fourth quarter of 2020.

A struggling business can be left with business debts that need some sort of solution or attention so the owner does not carry those along after the business closes.

Among the key findings among business owners 45 and older:

  • Ninety percent of Asian owners, 85% of Black owners, 81% of Hispanic owners, and 77% of white owners reported a revenue decline in 2020.
  • Among Asian owners, 77% characterized their financial condition as fair or poor; that figure was 75% for Black owners; 66% for Hispanic owners
  • Sixty percent of all small-business owners in this group didn’t draw a salary in 2020; 50% paid business expenses with personal funds.
  • While 81% of white-owned firms reported receiving the full amount of PPP loans requested, firms owned by older people of color were more likely to indicate financing gaps; 71% of Asian firms, 63% of Latinx firms, and 46% of Black firms obtained the full amount.
  • Nearly one in five Black business owners reported receiving none of the PPP financing they sought.
  • Asked if they would apply for additional government aid if it were available, 80% of Asian-owned firms said yes, as did 75% of Black-owned firms, 74% of Hispanic-owned firms and 59% of white-owned firms.
  • Almost 30% of firms overall said they didn’t expect sales to return to normal until 2022 or later.

“This illustrates the profound disruption the pandemic caused to small businesses and the stress it’s placed on older business owners’ financial health,” said Claire Kramer Mills, assistant vice president at the New York Fed. “A majority of older firm owners either reduced their salary or didn’t take one at all, dipping into personal savings to cover business expenses., People of color who own small businesses were more likely to borrow from personal networks or against their home or retirement accounts. They were also more worried about their personal credit score or depletion of personal assets and picked up second jobs.

“This report demonstrates the need to build an emergency toolkit for these small businesses, which are a vital part of the infrastructure of America’s neighborhoods, to ensure they have ready access to credit and the resources they need to rebuild and thrive,” Ms. Kramer Mills said.

“We know that entrepreneurs 50 and older are different from their younger counterparts,” said Nancy LeaMond, AARP executive vice president and chief advocacy and engagement officer. “They often have assets they can and do use to fund their businesses, but this can be very problematic. Accessing retirement funds is of particular concern since there is a shorter time horizon to rebuild those accounts.

“AARP has launched the Small Business Resource Center, which offers information and resources about funding sources to consider for entrepreneurs at every stage of their business journey – from starting, to managing, to growing that business. We’ve had about 10,000 users in the two months since the debut of the resource, demonstrating that older entrepreneurs want real tools to help them along their journey.”

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