The National Federation of Independent Business (NFIB) says small businesses are now in very, very deep trouble. To date most of them have survived on creativity that includes ways to sell products that don’t involve person-to-person contact or that involve limited person-to-person contact.
To survive, many used money borrowed from the $600 billion Paycheck Protection Program (PPP) passed by Congress a couple of months ago. They also have been helped by patient landlords and patient debtors.
Those landlords and debtors can no longer be patient and the PPP money has run out. Now smaller, independent businesses are struggling and may not survive long enough for Congress to sort out a new protection program. It’s the one the Democrats and Republicans, and the president are at odds over.
Neither side can agree on exactly how to proceed so the potential help is stalled. If something isn’t done soon, or if the economy doesn’t recover, the NFIB says 23% of small businesses will close their doors within six-months.
Bill Phelan follows such matters for Equifax. He said:
* Defaults of small business debt has grown 2.7%
* By next year Equifax predicts that number will rise to 5% or 6%
Phelan said during the Great Recession of 2009, defaults hit 6.35%. Stimulus by the government durning the recession was just $1 trillion. So far $3 trillion has been spent and more — some day — will be on the way.
The question is when.
“The forbearance and the PPP have helped out a ton, but they can’t go on forever,” Phelan said. He’s predicting double-digit default rates in the hardest hit sectors of hospitality, food service and retail. There are others but these are the big three.
An example comes from Ari Takata-Vasquez who heads up the Oakland Indy Alliance. Its’ a small association of 500 businesses in Northern California. Takata-Vasquez said 44% of the association’s firms say they have enough money to run for another three months and that’s about all.
That same picture is seen in community after community around the country.
Small business in the U.S. is in deep trouble. Phelan, Takata-Vasquez and others in the small business arena predict that if Congress, the president and the governors of this country don’t figure out a way to get this under control, a huge percentage of small businesses will not be around when the smoke clears.
Source link: Insurance Journal