Small Businesses and COVID-19
I do not believe there is a single person in the United States who has not been affected by the global COVID-19 pandemic. Social distancing and reminders to wear masks in public have quickly become normal. We have watched thousands of businesses close, millions of people are out of work, and trillions of dollars have been spent to help American people and businesses weather the shutdown. According to a study by researchers at the University of Illinois, Harvard Business School, Harvard University, and the University of Chicago, over 100,000 businesses across the United States have closed permanently since March 2020. And according to a MetLife and U.S. Chamber of Commerce poll released in May, more than one in five small businesses say they are two months or less from closing.
Many of the businesses which were able to remain open, suddenly had significantly less money coming in, but they still needed to be able to pay their bills and payroll. Nationwide, 66% of surveyed small businesses experienced a revenue loss from April 26 to May 23, but that varied among the 50 largest metro areas—from 74% of small businesses in Buffalo, NY to 58% of small businesses in Jacksonville, FL. The pandemic’s impact on small businesses differs across the country for a variety of reasons including the virus’s concentration in the area, the severity of the state’s shelter in place orders, and businesses’ specific industry.
Boston Planning and Development Agency published a report on April 6, 2020 with an early analysis of the economic impact COVID-19 is having in Boston. They found, in Massachusetts specifically, initial unemployment claims rose 1,904% overall, and at least 250% in every sector of the economy between the second and third week of March. Over the third and fourth weeks of March, over 329,000 Massachusetts workers filed initial claims. And while every corner of the economy has been impacted by COVID-19 in some way, seven sectors in Massachusetts have been hit particularly hard, and remain highly vulnerable. Those sectors are; Accommodation and Food Service; Arts, Entertainment and Recreation; Construction; Health Care and Social Assistance; Other Services, including Personal Care, Repair and Maintenance, and Household Employees; Retail; and Transportation and Warehousing.
So in March, the CARES (Coronavirus Aid, Relief, and Economic Security) Act granted much needed relief, yet it still was not enough. On May 28, the U.S. House of Representatives passed a modification of the $660 billion Paycheck Protection Program (PPP) they passed in April to make loans more accessible and flexible for the nation’s struggling small business sector. When the program was first launched there was a huge surge in demand for PPP loans in the first several weeks, yet many small businesses did not apply because there were concerns over the lack of guidance in how the loans could be forgiven. According to the Small Business Administration, the Paycheck Protection Program resumed accepting applications July 6, 2020, in response to the President signing the program's extension legislation. The new deadline to apply for a Paycheck Protection Program loan is August 8, 2020. At a local level, the City of Boston was offering three different levels of Small Business relief grants. These grants can be used to help fixed debts, payroll, accounts payable, lost sales, lost opportunities, and other working capital expenses; though unfortunately they are no longer accepting applications. They have said if additional funding becomes available they will reopen applications.
While now, businesses who apply for a federal PPP loan are almost guaranteed to receive the loan, back in April, when the program began, only about 50% of small businesses who applied, received a loan. Again, this varied by geographic region, some places 70% businesses were receiving their loans while others hovered around 30% (Boston was close to 50% at this time). This lag is incredibly important in understanding how drastically small businesses were affected. By the beginning of May, small businesses had already been through about six weeks of stay-at-home orders, so they were running out of cash fast, which means at the time they applied the chance of receiving a loan was averaging 50% and they were just about out of money. If businesses were unable to hang on through that turbulent time, or got denied for a loan they desperately needed, they had no choice but to close up shop. And to make matters more stressful, according to a survey by the National Federation of Independent Business, 75% of surveyed small business owners find the terms and conditions of their PPP loan difficult to understand. The process for loan forgiveness is likely going to be much more complicated than the process for loan applications. So without local technical assistance, the paperwork burden and confusing rules and regulations could leave small businesses with debts that they cannot sustain, and the United States could see even more small businesses close their doors. This article, published June 30, 2020, helps break down some things to know about PPP loan forgiveness.
Meanwhile, the businesses that remained open saw a large shift in how they operate day to day. With many employers opting for a work from home structure, teleconferencing has become a new normal across many sectors. The service and hospitality industry was one of the hardest hit, though even when restaurants were told they could no longer serve patrons in their dining rooms, many were able to adapt quickly and shift their focus to streamlining mobile orders and take out. There was also a big push among communities to go out and support small businesses in any way they could, whether that was helping promote them on social media, or purchasing gift cards, to keep the cash flowing into the businesses even if they were not able to render services just yet. As we move toward what is hopefully the tail end of the worst of it, many people are left wondering what the lasting impacts will be and if things at work will ever be the same.
As states begin to reopen, many in stages, a few industries at a time, those that are able to open up and receive customers once again are opening up to a very different world than the one in which their business began. Offices are measuring 6 feet apart between coworkers, hallways have turned into one-way corridors, masks are mandatory almost everywhere, and some employees have elected to continue working from. With children and elderly relatives, many people have found it easier to be under the same roof as their families. Only time will tell if the dramatic transition into working remotely will last, or once the last of the social distancing orders are lifted, we will resume life as usual again.
If your small business has been impacted by COVID-19 and you need help understanding the terms of your PPP loan or small business grant, reach out to our firm; we are happy to help you navigate the confusing intricacies of this unprecedented time.
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