COVID-19 has been impacting the United States economy since March, and small businesses have been the hardest hit from the start. When the stay-at-home orders were first implemented, many nonessential companies were forced to close the store, all while generating valuable revenue.
Now that states are easing restrictions and the country is beginning to reopen, small businesses have the opportunity to begin the recovery process. But that may be easier said than done. After all, the country is still struggling with a recession, and many Americans are still dealing with loss of income. At a time like this, consumers may hesitate to buy more than just the basics, leaving small businesses in the cold at a time when they may be desperate for an income.
How are small businesses maintained?
An estimated 20% of small businesses are closed due to the COVID-19 crisis, according to the June Small Business Coronavirus Impact Survey by MetLife and the United States Chamber of Commerce. Of these, only 1% is permanently closed, while 19% is temporarily closed. But for that 19% to open their doors, a dose of financial relief may be necessary.
So far, there has been a fair amount of assistance, including PPP loans that many small businesses claimed in April and May. But some small businesses are at the point where they have depleted those PPP loans and, in the absence of additional relief, they may not wait much longer.
Furthermore, 55% of small businesses believe that it will take six months to a year before the economy returns to normal. That may be an optimistic outlook given that a second wave of COVID-19 later in the year could lead to major setbacks. But even so, some companies cannot afford to wait that long to see the regular flow of customer traffic they are used to.
Cash flow has also been a concern for small businesses during the pandemic. Right now, only 56% of local businesses are comfortable with their cash flow, which means that many businesses continue to need help.
How could that relief be? Additional APP funds could go a long way toward retention or job creation while giving companies the cash they need to continue operating. PPP loans are currently forgivable if 60% of those funds are used for payroll purposes. That gives small businesses more flexibility to use the remaining 40% to cover other essential operating expenses.
If small businesses have the opportunity to apply for a second PPP loan, it would certainly make a difference to many more who close their doors and stay afloat. Or, lawmakers can get a different relief measure, perhaps interest-free loans that are not forgivable, but that solve the cash flow problems that many local establishments are no doubt dealing with.
President Trump has made it clear that he expects a second stimulus package to be approved. Hopefully it will include provisions that help small businesses and enable them to continue to serve and serve communities.