In the midst of the current global crisis sparked by COVID-19, it’s hard to know what phase of the situation we’re in. If real life was a movie entitled CORONA: WORLD CHAOS, would we be in the second act, unwittingly approaching the climax, or the third act, after the worst has passed and it’s only a matter of waiting until things return to normal? Every day, the answer seemingly changes as new information is hurled at us in overwhelming quantities. Increasingly, it seems that until an effective vaccine is developed against COVID-19 (most likely mid-2021 at the earliest, according to experts), life cannot return to pre-pandemic conditions without serious consequences.
Naturally, this also raises questions about what will happen to the 30+ millions of small businesses in the United States, which make up 99.9% of all businesses and approximately 47% of the US workforce. Given the unprecedented cause of the current crisis, there is certainly no easy answer. Still, it may help to study how small businesses were affected during the last big economic downturn in recent history: the Great Recession from 2007 to 2009. According to Brookings, during the Great Recession, small businesses (companies with fewer than 250 employees) underwent “disproportionate job loss compared to their share of total employment in the economy.” Although they accounted for 45% of the workforce, they made up 62% of net job losses from 2008 to 2009. This statistic makes sense when you consider the fact that younger and smaller businesses are often most vulnerable to economic shocks, given that they tend to have little in the way of rainy day savings. In that same timeframe of 2008 to 2009, for instance, employment losses among young (zero to five years old) and micro (less than ten employees) businesses were as high as 35% in some sectors.
In present day, the US government and the Federal Reserve have taken drastic measures to try to ease the disproportionate burden that falls upon small businesses, chiefly through the Paycheck Protection Program established by the CARES Act. Implemented by the Small Business Administration, PPP loans are meant to incentivize small businesses to keep their employees paid, with all loans forgiven as long as businesses continue to keep paying employees for at least 8 weeks. However, with the initial $350 billion allotted for the PPP drained almost immediately after applications opened (at the time of publication, US lawmakers have greenlighted an additional $310 billion for the fund), many small businesses have had to turn to sources other than the federal government in order to remain afloat.
As of now, it’s too early to tell whether the current federal stimulus efforts will be adequate in combating the severe economic stress posed by COVID-19 on the US economy. Even if these measures are successful, most small businesses will likely not be able to emerge from the current shock unscathed. Consequently, it’s all the more important that individual businesses seek out alternative forms of aid, whether it comes in the form of state-level assistance or corporate grants, and take advantage of every opportunity to adapt to the current situation. Additionally, as consumers, it is vital that we continue to support smaller businesses within our means. Though it may be very tempting to feel as if our individual contributions are inconsequential, the world would be in a much worse state indeed if everyone acted as if that were the case.
It’s a tall order for sure, but the most we can do is try hard and hope for the best. Whether you’re a small business owner looking for ways to adapt, or an individual seeking out ways to support the businesses around you, get started by checking out EEVM’s Covid-19 Guide & Resources.
Written by Rurie Yi | IQ Associate