Small Business Loans During Shutdown

By | May 9, 2023
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Small Business Loans During Shutdown – Summary. Small businesses with fewer than 500 employees account for 48% of US jobs and 43.5% of GDP and are facing an existential crisis due to the coronavirus crisis. To understand the economic impact on small businesses, the authors surveyed approximately 5,800 businesses nationwide. They found that many of these companies had closed or gone out of business, were unsure whether federal aid would help them, and were struggling financially. They offer five recommendations for small businesses navigating an uncertain future. 2) Join the Salary Protection Program today. 3) Understand how customer needs have changed. 4) Make a realistic accounting. 5) Keep your best employees loyal.

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Small Business Loans During Shutdown

Small Business Loans During Shutdown

It will be years before we fully understand the economic impact of the coronavirus, but one thing is painfully clear now. Small businesses across the country are experiencing an existential crisis: Businesses with fewer than 500 employees account for 48% of America’s jobs and 43.5% of GDP. These small businesses are an integral part of the U.S. economy, but they are often financially vulnerable, with little cash flow or small financial shocks to cushion. Due to the spread of the new coronavirus, companies across the country are forced to temporarily close. Many businesses have constant costs, little revenue and the prospect of never opening.

Government Shutdown Shuts Out Small Business

Once the pandemic subsides, these small businesses will need help to re-emerge and once again become America’s engines of innovation. The Coronavirus Aid, Relief, and Economic Security (or CARES) Act earmarked $349 billion in loans and assistance for small businesses, which is more likely. You also need to make the best decisions to pass the time.

Over the past few weeks, we’ve explored the economic impact of the coronavirus on small businesses and ways to mitigate the economic damage they face. To assess the current situation, we partnered with the small business network Alignable to conduct a survey of approximately 5,800 small businesses in the United States. The sample includes companies from most major industry groups, states, and company size categories, and the percentage of survey responses from the largest states matches well with the percentage of companies in each of these states. While this is not a complete picture of the US economy as a whole, it does reflect the serious pain experienced by small, retail-oriented businesses. This is a picture of the crisis that was collected during the week at the end of March.

We tried to find out how small businesses are coping with the disruption and how long they expect the crisis to last. We particularly focused on their financial sustainability and the challenges they face in implementing the CARES assistance package. In addition, we spoke to banks, technology companies and other organizations to understand how the crisis is affecting their relationships with small businesses.

Based on our research, discussions with business and policy leaders, and the wider academic literature, we have identified ways forward. Let us provide two conclusions. Second, it provides a set of steps that small businesses can take to better weather the current crisis.

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45% of small businesses in our sample have temporarily closed due to Covid-19. Total employment in these companies has decreased by 40% since the end of January. The economic disaster was particularly severe in the Atlantic region surrounding New York, the US epicenter of the pandemic, where more than 55% of small businesses closed and jobs fell by 44%. In the Pacific, California experienced a state shutdown, while Washington experienced an early boom and a similarly dramatic drop in employment.

The magnitude of the shock to small business demand is hard to overstate. About 49% of the US population was living in some form of shelter or stay-at-home when the survey began on March 26. A week later, about 87% of the US population was living under stay-at-home orders. This emphasizes both the seriousness of the situation and the pace of development.

Most small businesses had less than two months of cash on hand to weather the shock. The average business that spent more than $10,000 a month usually didn’t have enough cash on hand to cover two weeks of spending. These results suggest that without lines of credit and cash injections, businesses would need to reduce or reduce costs significantly.

Small Business Loans During Shutdown

For banks and policymakers, this underscores the importance of not only financing companies, but also streamlining operations and getting companies funded quickly. Delays in the delivery of aid can have a significant negative impact on business sustainability.

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3. The majority believe we can reopen by the end of 2020, but the majority of the minority are less certain.

About 60% of respondents expect to be able to open by the end of 2020. However, almost 30% think it is somewhat likely that they will be able to reopen and almost 10% think it is not or very unlikely. Business will resume by the end of the year. Companies with more cash on hand were more prosperous throughout the year.

This suggests that the targeting of current bailouts and the ability of companies to make other adjustments will help determine how many survive this year.

Perhaps the biggest unknown for businesses (not to mention the rest) is exactly how long the current disruption will last. More than a third of companies surveyed thought the disruptions would be over by June. But another third thought the unrest would continue beyond August.

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This underlines the importance of transparency and clear guidance from politicians on what to expect from the unrest in the coming months. The government cannot promise that the Covid-19 pandemic will end by a specific date, but it is realistic about the timeline and commits to courses of economic medicine that will allow the economy to reopen after the end of the pandemic.

While many businesses need cash injections, our research also found that many do not plan to seek help. Companies were concerned whether they would be able to qualify. They weren’t sure if they would be able to repay the loans or if the government would eventually forgive them. They were concerned about the complexity of the process and the difficulty of getting a loan. And they were afraid that the money would not come in time. Their concerns highlight the importance of the loan process and implementation.

Collectively, these findings indicate a complex, complex, and rapidly evolving landscape. With that in mind, here’s what small business owners should do now.

Small Business Loans During Shutdown

Based on our own research, our interactions with businesses (both small and large), and the broader academic literature, we offer five steps to help small businesses navigate the current landscape.

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When thousands of people die, the stock market crashes, or the unemployment rate rises, it’s easy to panic. Please don’t! Studies have shown that people are more likely to make mistakes when money is tight and they are ready to think about financial stress. This is a condition that many people now describe. Here are some strategies for making good decisions when the world is in flux.

First, take your time and decide. In the current situation, it can be tempting to do something and make a big decision to do something. Many entrepreneurs love to take action and refuse to leave anything behind when they can help. But the way the Covid-19 crisis is unfolding, it’s a bad strategy if it’s becoming clearer every day what to do. With better information, everyone can make better decisions. We will have more information tomorrow than today. Give yourself a cooling-off period before taking the big leap. Even having a trusted third party, such as a friend or colleague, watch with you can help you avoid regrets.

What you can (and should) do now is create a detailed emergency plan. These are overwhelming times and “saving the business” is a difficult task. But something like “Day 1: Call the landlord, Day 2: Apply for a loan” makes more sense. Better yet, think about what you would do in 20 days if things got better or worse. Research in social psychology and behavioral economics shows how planning can help people achieve their goals. Break big goals into smaller goals and focus on achieving them.

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