The COVID-19 crisis has battered the U.S. economy on a whole, spurring a full-fledged recession. But while relief has been made available for small businesses -- those perhaps less equipped than larger businesses to weather the storm -- it also has not been enough to prevent those establishments from letting employees go.
Only 29% of small businesses have retained their entire staff throughout the pandemic, according to a new survey by OnPay, a payroll and HR software provider. Meanwhile, small businesses laid off or furloughed a median 27% of their workers, while 7% let their entire staff go.
All of the aforementioned job loss comes in spite of the Paycheck Protection Program, whose purpose was to prevent layoffs and help small businesses rehire staff. And despite outside reports that PPP loans did, in fact, prevent layoffs, it begs the question: Was that relief really enough? And what's going to happen now that so many of the businesses that received PPP loans have exhausted those funds?
Were PPP loans really enough?
The Paycheck Protection Program offered small businesses the chance to borrow up to two-and-a-half times their monthly payroll costs, and PPP loans were entirely forgivable provided that 60% of their proceeds or more were used to cover payroll expenses. But while those loans may have helped some businesses minimize layoffs, it's clear that they didn't necessarily prevent them, as evidenced by the fact that 71% of small businesses still had to let workers go to some degree.
Furthermore, many of the businesses that received PPP loans have since exhausted those funds, or are rapidly reaching that point. And while PPP loans aren't the only funding option small businesses can pursue, they were among the most affordable.
In the coming weeks, we may therefore see an uptick in layoffs across small businesses as PPP loans are depleted and revenue doesn't pick up. Though much of the country has opened up since the lockdown that ensued earlier in the year, consumers aren't exactly rushing to spend money in the midst of a recession. And even if some businesses are seeing more foot traffic, it may not be enough to cover the cost of the safety measures that needed to be put into place just to operate.
Imagine an independent bookstore that's now spending money on new shelving that allows for social distancing, barriers between customers and cashiers, sanitizing stations throughout the shop, and protective gear for employees. All of these things come at a cost, and if not enough customers feel comfortable coming in -- or aren't comfortable spending on something that's technically not a necessity -- that business is unlikely to thrive in the absence of additional relief.
Last week, President Trump insisted that lawmakers will come to terms on a second relief package to follow up the CARES Act, which was signed in late March. He even went so far as to say it would be generous. Let's hope that small businesses are included in whatever that package turns out to be. Otherwise, widespread layoffs could drive the already substantial unemployment rate exponentially higher.