A reckoning for small business
The coronavirus pandemic is putting America’s small businesses to the test of a lifetime. Millions might not survive — and many of the tens of millions of jobs they support could evaporate.
The big picture: None of the rescues that have emerged — including federal government loans and grants, states offering their own support programs, and even some in the private sector stepping up to help — has made the future look particularly bright.
The suffering is already having devastating ripple effects on the U.S. economy.
- Small businesses shed more than 11 million jobs in April — making up more than half of the 20 million lost in the private sector last month, according to payments processor ADP.
The long-term fallout will be harsh:
The big are getting bigger while the smallest shrink — or disappear. It was hard enough to compete before the pandemic. But now, their giant competitors — some of which kept operating as essential or have huge online presences and more resources — are thriving, as corporate earnings reports this week showed.
- For small businesses, there's a "basic desperation for survival," says Tom Sullivan, who heads up small business policy at the U.S. Chamber of Commerce.
Half-capacity and tighter margins. Among restaurants, for example, "distance eating" will require pouring a lot of money into keeping diners away from one another and from the waitstaff, as Axios' Jennifer A. Kingson reported this week. Small stores may not be allowed to let in as many shoppers at a time as they had before.
- Joanne Chang, who runs Boston-based restaurants, says she hopes business returns to the point where she needs all of her employees back.
- “But realistically with social distancing we don’t think that’s going to be the case,” Chang said at an event hosted by the Federal Reserve this week.
Less demand. Businesses that rely on foot traffic during the workday, for example, will see demand dry up as bigger corporations tell their workers to stay home (possibly forever).
- And high levels of unemployment are expected to persist even as the economy reopens, which will crimp consumer spending that small businesses rely on.
The lingering threat of a “second wave.” Although President Trump has vowed to keep the economy open even if there's a fresh spike in coronavirus cases, individual states and businesses could proceed differently — as they did the first time.
- The specter of a next-wave outbreak raises a new set of questions for small business owners about how they to operate under the lingering threat of a new economic lockdown — and more lost revenue.
The bottom line: Post-pandemic America will have fewer of the neighborhood shops, restaurants and bars that we've grown up with, relied on, worked for, and viewed as pillars of our communities. Holly Wade, head of research at the National Federation of Independent Business, warns of "a fine line" between surviving temporary closures or reduced business during lockdowns and insolvency.
- "I don’t think it would be overstating to say a large number of small businesses are likely not to make it to the other side," Wade says.