
Small businesses rule the business community, standing at almost 30 million across the United States. The definition varies by industry, but the Small Business Administration (SBA) defines a small business as one that employs fewer than 1,500 people and generates a maximum annual revenue of $41.5 million (as of 2017.) While 99% of businesses have 500 employees or less, still roughly 88% have less than 20 employees.
These small business owners have dealt with a pandemic that brought on closures, supply issues, workforce availability, inflation, and recession threats; but many have still managed to come out on top.
Many businesses survived due to the Stimulus offered by the Government in the Paycheck Protection Program, otherwise known as the PPP Loan. This loan allowed many businesses to keep employees paid and keep their businesses open during the early days of the pandemic. With a first round in spring of 2020 and a second round of PPP in early 2021, close to 12 million businesses were helped with the PPP Loan.
However, millions of businesses still need help due to the current economic situation. In spring of this year, the National Federation of Independent Business (NFIB) released their latest update of the Small Business Survey series. These surveys assess the impact of the pandemic on small business operations, economic conditions, and the utilization of small business loan and tax credit programs. A few highlights from the surveys are mentioned below showing what businesses think of inflation and labor issues.
Inflation and Labor Highlights from the latest NFIB Small Business Survey:
- Inflation – The top problem for small businesses
- 34% of owners say it’s their most important problem in operating their business
- inflation and the percent of owners raising prices are at levels not seen since the recessions of the early 1980s
- “As inflation continues to dominate business decisions, small business owners’ expectations for better business conditions have reached a new low,” said NFIB Chief Economist Bill Dunkelberg. “On top of the immediate challenges facing small business owners including inflation and worker shortages, the outlook for economic policy is not encouraging either as policy talks have shifted to tax increases and more regulations.”
- Labor – Labor quality remains in second place behind inflation
- 94% of hiring businesses reported few to no qualified applicants for the positions they were trying to fill
- 24% of small employers are currently experiencing a significant staffing shortage and another 18% are currently experiencing a moderate shortage
- When asked what adjustments, beyond normal hiring practices, small employers have taken to attract applicants for open positions, 85% reported increasing wages
- 28% increased paid time off and another 22% offered or enhanced hiring bonuses. 18% of small employers offered or enhanced referral bonuses and another 27% offered or enhanced health insurance benefits
- There’s not been much difficulty in filling positions in the construction, manufacturing, services, and retail sectors
- 94% of hiring businesses reported few to no qualified applicants for the positions they were trying to fill
In the surveys, NFIB also mentions the Employee Retention Credit (ERC) and the familiarity that small businesses have with the program, or lack thereof. The ERC, sometimes called the ERTC, is broadly misunderstood and underutilized. When originally released alongside the PPP Loan, a business owner had to choose either the PPP or the ERC and could not utilize both programs. This changed in the Tax Relief Act on December 27th, 2020, which allowed business who took advantage of the PPP to also pursue the ERC. Below are some more highlights from the surveys, showing how the ERC relates to small businesses.
Employee Retention Credit Highlights from the latest NFIB Small Business Survey:
- ERC – The main obstacle is that employers are not fully aware of the program’s benefit
- Only 13% of small employers are very familiar with the ERC and another 41% are somewhat familiar
- A fifth of small employers claimed the ERC for wages in 2020
- Another 18% of small employers claimed the ERC for wages in 2021
The Employee Retention Credit is complex, however with the right partner to properly facilitate a study and provide potential IRS audit support, businesses can take advantage of the ample savings the ERC has been known to provide. The program has helped businesses get much needed capital in the tens, to hundreds of thousands of dollars. Our Tax Credit Experts here at Incentax can guide you through the process and help qualify your business for the ERC. Contact us today to start the qualification process and receive the support your small business is entitled to!
References:
- https://acrobat.adobe.com/link/review?uri=urn:aaid:scds:US:909a210b-f7cb-3bf1-8536-ecd51c19fc6b
- https://acrobat.adobe.com/link/review?uri=urn:aaid:scds:US:87af253c-a888-3134-9f7a-ea5db7b20070