The plight of small businesses

The coronavirus pandemic is wreaking social and economic havoc on a scale considered by many to be one of the worst global crises since the end of World War II. In addition to the terrible human tragedy of COVID-19, the pandemic has shocked the global economy and forced it into a recession. While the situation is dire everywhere (the British economy might be headed for its worst economic downturn since the early 1700s), the effect on the U.S. economy merits particular attention.

The numbers there are heartbreaking: 20.5 million jobs lost in April. The skyrocketing of the unemployment rate to 14.7% -something not seen since the Great Depression era that ended in 1939. The job growth of a decade practically wiped out in weeks (by mid-April). The worst retail sales drop on record (in March). And when it comes to the business landscape, enterprises of all kinds and sizes have been affected.

There is one group, however, to whom the challenges at hand are particularly severe: small business owners. Small businesses typically lack the necessary cash flow to weather an economic storm such as the one we are experiencing now. And while there has been a great deal of innovation in the ways small enterprises are attempting to provide their services in a new stay-home environment, operating normally has all too often proved to be an impossibly difficult task. In her compelling article published in The Atlantic, Annie Lowrey points to data that suggests roughly 30 percent of small businesses have already shut down since the pandemic began.

The problem has been addressed by U.S. Congress and the presidential administration, resulting in the $660 billion Paycheck Protection Program (PPP), a massive loan initiative designed to provide funds to businesses to help them keep their workforce on payroll and to cover basic costs. Insofar as certain conditions are met, handed out PPP loans will be either partially or fully forgiven.

However, there have been substantial implementation problems. And with small business owners’ uncertainty of eligibility on the one hand and confusion over procedural practices on the side of banks on the other, the initiative has been called “too little, too late”. There also seems to be some indication that loan applications from larger, more wealthy businesses have been given priority. With the consumer economy and demand expected to remain weak for many months to come, the existential threat to small businesses has become all too real and confidence levels have dropped to record lows.

In the end, many small businesses will not survive the current devastation. And this development will likely have catastrophic effects on entrepreneurism, disruptive innovation and, indeed, urban life. And who might come a-knocking at the door of a closed Mom and Pop store on main street to fill the demand void? Go figure.

Featured post image: Photo by Krisztina Papp on Unsplash

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