Cortera CEO Jim Swift joins Yahoo Finance’s Zack Guzman to discuss their recent Moody’s-backed COVID-19 Economic Recovery Tracker, which uses real-time data to show the spending and payment behavior of over a million U.S. small businesses.

Video Transcript

ZACK GUZMAN: Meantime, we've been tracking the way that small businesses have been responding to the coronavirus lockdown orders, as well as trying to figure out when things might return to normal. Obviously, there are a lot of questions on that front, and it raises new questions about how they're spending to make sure that they can stay afloat, hopefully, across to the other side.

Joining us for more on that is the CEO of Cortera, Jim Swift, who's been working with Moody's to dig into answering that question. Of course, Cortera is a business platform that recently debuted their Moody's-backed COVID-19 economic recovery tracker. And Jim, thank you so much for joining us. I guess, we'll jump right into that tracker. I mean, what have you been seeing on the way that small businesses have been trying to brace for all this, how they've been navigating it, and what they might think about their future looks like.

JIM SWIFT: Well, what we do is we track over $1.5 trillion in annual spend between businesses. And that's an important indicator into the health of companies because as they spend more, they tend to hire more. As they spend less, obviously, they tend to cut on payroll as well.

And what we saw in April was a pretty significant drop in business spending across the board. We saw an 8% year over year drop. And it was disproportionate to SMBs. They cut their spending by twice the rate of big companies, by about 11%. That's troubling.

ZACK GUZMAN: Have you-- I mean, I guess the data hasn't necessarily come in yet that you might have seen an uptick. Some states started reopening here on the front of small businesses. But is there any kind of insight there that the bottom may be in when we look at that and where we might go, you know, for the month of May?

JIM SWIFT: Well, it certainly wasn't in April. We only saw a couple of small upticks, and they were around hospitality spending with states to think in anticipation of opening back up, restocking on things, but certainly, nothing substantial. There has been this shift, though, for businesses to more of this work-from-home culture that we're all in now, this new economy.

So telecommunications and food production related things are up. But other than that, it was down in 75% of the industries. As we look toward May, though, we expect to see some pretty significant increases in some of the spending. The question will be whether or not it sticks or whether it dips again because consumers aren't coming out of this stay-at-home economy that they're in.

ZACK GUZMAN: Yeah, I guess, the big question is how quickly consumers will come back since that was really the only thing that was holding up the economy before COVID-19 hit, the strength of the consumer, something we talked about for so long. And if they don't come back, the questions there are how long some of these businesses can continue to pay payroll.

And we've seen obviously the PPP has helped some small businesses here. But when you think about how much longer this could go on, I mean, what do you see when you look at the actual underlying data, the financial health of some of these small businesses navigating all this in uncertain times for how long it could last?

JIM SWIFT: Well, it depends on industry, and it depends on state. But as a rule, small businesses don't have nearly the cash reserves that bigger companies have. And so when you look at industries like hotel and restaurants, it's going to be very difficult for a lot of them to survive.

And there's also this dichotomy we're seeing between big companies and small companies in industries that seem to be growing. So online retail is an area where we saw a 21% increase in spending, but with small business versions of online retailers, it was down 26%. And so companies like that, are they going to be able to survive through this? You know, we'll see.

Food and beverage stores is another area where we saw big companies so far grow 20%, April over last year. But the small versions of those down 8%. So as we think about the recovery, a lot of people talked about V shapes and U shapes and swoosh shapes and all these other shapes. But the way we look at it is when we start to see consistent growth by SMBs in their spending, that's when we'll start to see job growth again.

ZACK GUZMAN: Yeah, I mean, we haven't seen it yet, so still waiting for that on that front. You know, a personal favorite, square root shape, that's a good go-to that I've heard as well. But Jim Swift, I want to thank you for taking the time. Appreciate it, Cortera CEO joining us on this Monday. Thanks so much, Jim.

JIM SWIFT: Thanks a lot.