COVID-19 has been hammering the U.S. economy since March, and small businesses have been bearing the brunt of it from the start. When stay-at-home orders were first implemented, many non-essential businesses were forced to close up shop, all the while giving up valuable revenue.
Now that states are easing restrictions and the country is starting to open back up, small businesses do have an opportunity to begin the recovery process. But that may be easier said than done. After all, the country is still battling a recession, and many Americans are still grappling with income loss. At a time like this, consumers may be hesitant to buy more than just the basics, leaving small businesses out in the cold at a time when they may be desperate for revenue.
How are small businesses holding up?
An estimated 20% of small businesses are closed due to the COVID-19 crisis, according to June's MetLife & U.S. Chamber of Commerce Small Business Coronavirus Impact Poll. Of those, only 1% are closed on a permanent basis, while 19% are closed temporarily. But for those 19% to open their doors, a dose of financial relief may be needed.
So far, there's been a fair amount of assistance, including the PPP loans that many small businesses clamored for in April and May. But some small businesses are at the point where they've exhausted those PPP loans, and in the absence of additional relief, they may not hang on much longer.
Furthermore, 55% of small businesses believe it will take six months to a year before the economy returns to normal. That may be an optimistic perspective given that a second wave of COVID-19 later on in the year could result in major setbacks. But even so, some businesses can't afford to hold out that long to see the regular flow of customer traffic they're used to.
Cash flow has also been a concern for small businesses throughout the pandemic. Right now, only 56% of local establishments feel comfortable with their cash flow, which means many businesses continue to need relief.
What could that relief look like? Additional PPP funds could go a long way toward retaining or creating jobs while giving businesses the cash they need to keep operating. Currently, PPP loans are 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 are given an opportunity to apply for a second PPP loan, it would no doubt spell the difference between many more closing their doors and staying afloat. Or, lawmakers may land on a different relief measure -- perhaps no-interest loans that aren't forgivable, but that solve the cash flow problems so many local establishments are no doubt dealing with.
President Trump has made it clear that he expects a second stimulus package to pass. Let's hope it includes provisions that aid small businesses and allow them to keep running and serving communities.