Alternative Loans Available to Re-Opening Businesses
September 01, 2020
Small businesses are the backbone of the United States economy. They employ nearly 50% of all Americans working in the private sector and play a large role in keeping a strong national economy.
As the pandemic continues to affect customer’s buying decisions across the United States, small businesses in particular appear to be heading towards a very uncertain future. Businesses that rely on heavy foot traffic are struggling to survive as people spend more time at home and do more of their shopping online. The industries that have been most affected by the COVID-19 pandemic are:
Affect on Small Businesses
Earlier this year lockdowns across the country affected small businesses in these industries the hardest when they were forced to close their storefronts, leaving many without the ability to generate income. According to the McKinsey Consulting Company, a large number of small businesses in accommodation and food services are made up of teams of 20 or fewer people and have a greater probability of closing permanently during a recession. The United States is beginning to see this play out as small team businesses (restaurants, clothing boutiques, etc.) continue to close permanently in every state.
Small team businesses are not the only ones facing danger, also at great risk are small businesses with more than 50 employees that were already in financial trouble before the virus outbreak. Research from the federal reserve reported that only 35% of small businesses were in a healthy financial state by the end of 2019.
Due to social distancing, small businesses are being forced to change the way they do business. Many have adapted by offering all their products and services solely online. Others have completely changed their product offering to cater to customers’ new pandemic lifestyles.
Small businesses are also having a difficult time making payments. On March 13 the White House declared the COVID-19 outbreak a national emergency and since then 23.6% of small businesses across all industries in the United States have reported missing some sort of scheduled payment. This is according to a survey conducted by the United States Census Bureau in April. Taking a closer look at each industry reveals that the accommodation and food service industry has been negatively affected much more than any other industry, with 51% of small businesses in that sector reporting having missed at least one scheduled payment. Census surveys also showed that 37.3% of small businesses in the educational services industry and 28.3% in the arts, entertainment, and recreation industry missed payments in April.
Support for Small Businesses
Over five million businesses have received financial support through the government’s Payroll Protection Program (PPP) loans. These loans are designed to help small businesses keep their staff on payroll, and can be forgiven in the future so long as businesses use the funds for eligible expenses.
In addition, the Economic Injury Disaster Loan (EIDL) program has provided loans and grants to over 2.6 million businesses. The EIDL program is available to small businesses and non-profits around the country that are currently seeing a temporary loss of revenue due to the pandemic.
Even with this assistance, there are still many small businesses that will require more aid to keep their doors open as the pandemic continues. In response to this the U.S. government is expected to release a second relief package in the coming weeks.
Subscribe to our newsletter and get exclusive deals you wont find anywhere else straight to your inbox!