How the Pandemic Sparked a Surge in Local Business Applications and What It Means for Startups Near You

A Surge in Business Applications During the Pandemic

Between 2019 and 2020, the number of individuals in the United States who began the formal process of launching a business increased by 25%. This rise was measured through applications for an Employer Identification Number (EIN), a key step in establishing a legal business structure. While not every application leads to a fully operational company, the data signals a significant shift in public interest toward entrepreneurship. The trend suggests that more Americans are considering business ownership as a viable path to financial independence or stability.

The spike in filings began early in the pandemic, with a notable peak observed in June 2020—just months after the crisis first emerged. This timing indicates that many people may have acted quickly to respond to economic disruption. The concentration of applications in that month suggests a wave of motivation, possibly driven by financial uncertainty, job losses, or a desire to diversify income sources. These early filings may have laid the foundation for a broader wave of new ventures in the following months.

It is important to note that the EIN data does not capture all forms of business activity. Some individuals, such as independent consultants or freelancers, may not require an EIN and are therefore excluded from the dataset. Additionally, not all applications progress to actual business formation, as launching a venture involves steps beyond paperwork—such as securing suppliers, funding, or customer demand. Thus, while the numbers reflect rising interest, they do not represent actual business growth.

Regional Variations in Business Interest

The geographic distribution of business applications revealed a clear pattern: the southern United States emerged as a major hub for entrepreneurial activity. Nine of the top ten metros with the highest year-over-year growth in applications were located in the South, highlighting a regional trend in business formation. This concentration may be linked to factors such as lower cost of living, access to local markets, or a cultural openness to self-employment and small-scale enterprises.

Memphis, Tennessee, stood out as the city with the largest increase in EIN applications, rising by 77.9% between 2019 and 2020. In 2019, the city recorded 14,938 filings, which climbed to 26,572 in 2020—a dramatic increase that suggests a strong local response to pandemic-related conditions. Mobile, Alabama, also showed significant growth, with over 70% of its EIN filings rising during the same period, indicating a similar pattern of economic adaptation in other southern cities.

Other regions, such as the Midwest, showed less dramatic shifts. Cleveland, Ohio, was the only metropolitan area in the top 100 with negative growth, suggesting regional differences in economic resilience or access to support systems. These disparities point to the importance of local conditions—such as infrastructure, workforce availability, and policy support—in shaping entrepreneurial activity during times of crisis.

Sectoral Trends in Business Startups

The retail trade sector experienced the most substantial growth in business applications, with a 59.7% increase in EIN filings. This surge likely reflects the rise in e-commerce, local delivery services, and small retail operations that could thrive in a home-bound economy. Consumers increasingly turned to online shopping, creating demand for local vendors and delivery platforms, which in turn inspired more people to launch retail-based businesses.

In contrast, the mining industry saw a decline in applications, dropping by 21.3%. This decrease may be due to the sector’s inherent volatility and limited adaptability to changing economic conditions. The pandemic disrupted supply chains and travel, making traditional mining operations less feasible or profitable for new entrants.

These sectoral shifts illustrate how external events can reshape business landscapes. Industries that are more flexible, consumer-facing, or digital-oriented tend to see increased activity during periods of economic instability, while others remain stagnant or decline.

The Role of Economic Uncertainty in Driving Entrepreneurship

The onset of the pandemic created widespread financial instability, leading many individuals to explore alternative income streams. With job losses and economic volatility, people began to view business ownership as a way to regain control over their financial futures. The idea of relying on a single source of income became less appealing, especially when unemployment rates soared and economic conditions were unpredictable.

This shift was not limited to those who had lost jobs. Many individuals who had long wanted to start a business—perhaps due to personal passion or life goals—finally took action during the pandemic. The period offered a sense of urgency and possibility, making entrepreneurship feel more attainable than in previous years. The psychological impact of uncertainty may have also encouraged risk-taking, even among those who had previously hesitated.

The stability provided by government relief programs, such as stimulus checks and unemployment benefits, may have played a role in enabling this shift. With a perceived safety net in place, individuals felt more confident in making financial decisions, including investing time and money into new ventures.

Why Local Business Growth Matters in Times of Crisis

The rise in local business applications demonstrates how communities respond to crises with innovation and resilience. When people start small businesses, they often create jobs, support local economies, and foster neighborhood vitality. In cities like Memphis and Mobile, this surge may have helped rebuild confidence in local markets after economic disruption.

Local entrepreneurship also tends to be more adaptable than large-scale enterprises. Small businesses can pivot quickly to meet changing consumer needs—such as offering home delivery, curbside pickup, or digital services—making them essential in pandemic-era economies. This agility has proven critical in maintaining economic activity during uncertain times.

Moreover, the availability of business loans near individuals—especially in areas with high application volumes—can significantly influence whether a business idea becomes reality. Access to capital remains a key barrier, and the growing interest in business formation underscores the need for improved lending options in local communities.

Challenges and Limitations in the Data

The EIN application data, while useful, has notable limitations. It excludes applications from certain industries, such as agriculture, fishing, and private households, which may not reflect the full picture of business interest. Additionally, the data does not account for applications that are later abandoned or do not progress beyond the initial filing stage.

The absence of geolocation details in some records also affects the accuracy of regional analysis. Without precise location data, it is difficult to fully assess how individual cities or neighborhoods contributed to the overall trend. These gaps suggest that while the data offers valuable insights, it should be interpreted with caution and supplemented with other economic indicators.

Therefore, while the rise in applications signals growing interest in entrepreneurship, it does not directly measure the number of new businesses that have been established. A comprehensive understanding of actual business creation requires additional data on funding, operations, and long-term activity.

What This Means for Entrepreneurs Seeking Financial Support

The surge in business applications highlights a growing demand for financial tools such as business loans. As more individuals consider launching ventures, access to affordable, local financing becomes essential. In areas with high application volumes, the need for accessible lending options is particularly acute, especially for those without strong credit histories or collateral.

Local financial institutions and community lenders may play a key role in meeting this demand. By offering flexible terms and streamlined processes, these institutions can support new entrepreneurs and help maintain economic momentum during uncertain times. The trend also suggests that future policy efforts should focus on expanding access to small business financing.

For anyone considering starting a business, understanding the local lending environment is vital. A business loan near me may not only provide the necessary funds but also offer guidance on navigating the startup journey. With more people seeking to launch ventures, the availability and quality of financial services will continue to shape the future of local entrepreneurship.