Most small businesses kept paying their bills during the pandemic. Experts say that can only last so long.

• Government support has helped small businesses pay their bills during the pandemic, a report finds.
• Aid programs including the PPP and lender forbearance, along with reduced payrolls, have kept businesses afloat.
• But experts say that while stimulus aid is a start, relief needs to be more targeted in the future.

The coronavirus recession hit small businesses hard. However, with the help of small business lending programs and government funding, many businesses managed to continue making their payments, with credit in good standing.

A report released on Tuesday from the Urban Institute, a nonpartisan think-tank, found that despite significant revenue losses for small businesses in the past year, government support, reduced payrolls, and lender forbearance have helped those businesses continue paying their bills. Using data from businesses in Chicago, Detroit, Houston, New Orleans, New York, San Francisco, Seattle, and Washington, DC, the report found that while debts owed by small businesses have increased slightly since 2020, most have been able to keep up to date on payments.

"Our new evidence shows that the pandemic's effects have largely not - or at least not yet - translated into dramatically higher delinquencies or defaults among small businesses," the report said.

Nationwide, past-due payments or debts owed by small businesses have increased from 17.7% in February 2020 to 18.3% in January 2021, and the report said that while some businesses in the eight cities were more affected than others, differences "in business delinquency from city to city outweigh any effects observed since the pandemic."

Womply data found that revenues for small businesses are down 38% from pre-pandemic levels, while JPMorgan Chase reported that revenues are only down 9% from pre-pandemic levels.

Brett Theodos, a senior fellow at the Urban Institute and researcher on the report, said that given the disparate numbers on the revenue data, there isn't a definitive answer yet on how much revenues are really down, but "there is a revenue hit regardless of what that number is."

Despite the losses, those businesses have continued to stay afloat with the help of government-provided aid.

The Urban Institute report found that the Paycheck Protection Program - which lawmakers are now pushing to extend past March 31 - has factored into small businesses maintaining a strong credit standing due to the aid provided since the start of the pandemic.

And in President Joe Biden's $1.9 trillion stimulus plan signed into law on Thursday, $50 billion was set aside for small business aid, including $7.25 billion specifically for the PPP.

In addition, the report said that many businesses have shrunk their costs during the pandemic by cutting payrolls, and they have also benefitted from flexibility granted from creditors and landlords.

"The combined result of these three forces-PPP support, cost reductions, and forbearances-has been a significant growth of cash holding for small businesses, rising by more than 41 percent before tapering modestly after its peak in August 2020," the report said. "On average, small businesses have also been able to maintain strong credit standing because of these same forces."

While cutting payrolls and making other accommodations have helped small businesses survive in the past year, the report said that doing so is painful for the businesses and will constrain their future growths.

"Small businesses' abilities to maintain payments on average does not imply that all businesses and owners are doing well," the report said.

$300 weekly unemployment benefits were extended through September under Biden's stimulus, and the benefits, along with the additional PPP funds, will help people and businesses get by financially.

Theodos noted issues with the first round of the PPP, during which the businesses who truly needed the aid were not appropriately targeted, and he suggested that when looking toward future aid for small businesses, policies should ensure aid is being equitably distributed.

"Let's find those businesses that really need to help," Theodos said. "Let's support entrepreneurial ecosystems where they're not well developed, let's help de-risk loans that really are high risk, let's overcome the race equity gap that exists and business ownership in this country, and let's be more intentional around our targeting."