Economists at the University of Illinois, the Harvard Business School and the University of Chicago have done some research and they believe 100,000 small businesses have permanently closed since the COVID-19 virus landed on our shores in March.
The numbers are not cast in stone but the economists that penned the study believe they’ll be accurate. All of this in spite of a huge effort by the federal government to keep small businesses from going under.
Congress has sent $700 billion in relief funds to the Small Business Administration (SBA) and it has approved 4.2 million loans. Many small businesses are also looking into the Paycheck Protection Program but some worry they won’t meet the staffing requirements of that law.
That said, here is what the study predicts:
* 2% of small businesses are gone for good
* Most of the losses are restaurants
* The National Restaurant Association says 3% have gone under
* 34% of small businesses are paying reduced rent or postponing payments
A survey from the global payment network company, Veem says the surviving small businesses expect to be impacted negatively for the next 12 to 18-months. And 90% are looking at a serious economic slowdown.
* 65% of the surveyed companies say they have or will apply for a SBA loan
The National Council on Compensation Insurance (NCCI) says the impact will be huge because small business make up such a high percentage of the U.S. economy.
It is a negative — says Veem’s CEO Marwan Forzley — but some small businesses like those with an online focus are actually benefitting from the pandemic.
“When you look at the data, there’s surprising resiliency with these small and mid-sized businesses. Despite all the uncertainty, they’re trying to make changes in their businesses, to … either benefit from the situation or repurpose their business so that they’re not as badly impacted,” he said.
* 70% are uncertain about the economy in 2020
* 55% have already seen a big drop in revenue
* 30% — however — are optimistic
* Half are seeing supply chain disruptions
* 25% are investing in new technology
* 52% are cutting operational costs
* 59% are applying for loans
* 54% have frozen hiring
* 23% are downsizing staff
* 18% say they’re increasing staff
* Just 13% say they’ve done nothing
Source links: Insurance Journal, Axios.com