December 21, 2020
Main Street Monday — Americans Are Starting New Businesses at Record Pace
2020 saw a large spike in new business applications. New figures from a study by LendingTree indicate that in the first 13 weeks of the year, an average of nearly 74,000 businesses applied for employer identification numbers (EINs) weekly. From the following week through mid-October — the latest available data — the average was nearly 89,000.
Here are some of the other key findings from LendingTree’s most recent report:
- In 2020 there have been 1.26 million new business applications for high-propensity businesses (businesses with 1 or more employees).
- 65% of the new businesses created during the pandemic are small businesses with few or no employees.
- From March 27, 2020, to July 12, 2020, the number of weekly business applications for non-store (ecommerce) retailers grew by four times, from 5,070 to 20,370.
- July 12 was the peak for business applications for non-store retailers. In the following 10 weeks, business applications fell to an average of about 15,400 weekly.
- Not every state has seen the same level of dramatic business application growth. Wyoming, for example, has already surpassed its 2019 level of 18,200 new businesses while Nevada continues to see fewer applications each year.
LendingTree suggests that the increase in entrepreneurship is highly correlated with CARES Act unemployment payments, stimulus checks, and tax incentives. The additional $600 weekly in unemployment insurance payments increased the American personal savings rate to nearly 34% in April, the highest on record. Unemployment payments coupled with a new tax provision that allows qualified business owners to deduct up to 20% of their income created an incentive for people to set up new businesses and monetize side hustles.