The U.S. Chamber of Commerce released a report April 3 that documents how small businesses are responding to the pandemic. It makes for some bleak reading. But it also provides a basis for understanding how business will get through the crisis.
The MetLife & U.S. Chamber of Commerce Small Business Index is issuing results from a special survey this month on the impact of COVID-19 on the U.S. small business community. This survey shows that sentiment is significantly diminished compared to last quarter,1 despite some longer term optimism.
With high levels of concern about COVID-19 reported in every sector and region of the country, one in four small businesses (24%) report having already temporarily shut down. Among those who haven’t shut down yet, 40% report it is likely they will shut temporarily within the next two weeks. Forty-three percent believe they have less than six months until a permanent shutdown is unavoidable. Nearly half of small businesses (46%) believe it will take the U.S. economy six months to a year to return to normal.
But even in the midst of this negativity, there is hope that small businesses will get the help they need to outlive this crisis. Small businesses are looking for relief in the form of direct cash payments (56%), Small Business Administration (SBA) disaster loans (30%), and temporary cancellation of business payroll taxes (21%). All of these are happening: direct cash payments will soon be going out to many Americans, most small businesses will be able to apply for SBA disaster loans due to the impact of the coronavirus on April 3, and business payroll tax cancellations are part of the CARES Act just passed by Congress.
And, business owners remain confident.
Longer term, small businesses continue to be optimistic. Also, almost one in four (23%) say they expect to hire within the next year, while 57% feel positive about their overall business health.
The short-term outlook, however, recognizes that recovery is months, not weeks, away. From the summary.
For small businesses that did not shut down in the past two weeks, 40% say it is likely that they will do so in the next two weeks. This reflects the overall pessimism about a quick economic recovery in the small business environment: almost half (46%) believe it will take six months to a year for the small business climate to return to normal.
While 28% report that their business can continue operating without shutting down indefinitely, 43% believe they have less than six months, including one in ten (11%) that say they have less than one month, until a permanent shutdown is unavoidable.
A lot of good information in the survey results, which reflect some of the responses reported in an Association of Washington Business survey.
According to the 796 Washington employers who responded to the survey, the greatest impact of the coronavirus continues to be reduced revenue (80%), followed by reduced hours of operation (46%). This second round indicates that the third-highest impact on businesses has shifted from delayed hiring to closing their doors. Nearly one-third (32%) of respondents said they have applied for financial assistance to keep their business operating.
Over half (53%) of manufacturing companies reported supply chain disruptions and 91% have now implemented changes in operations due to the coronavirus pandemic. That’s up 11 percentage points from two weeks ago. Among those companies without changes, 23% anticipate changes in the next six months.
Cash is king.
AWB asked companies with 50 or fewer employees what tools or assistance they need from state or federal officials and 40% of responses involved the need for some kind of financial support. Access to cash was the overwhelming frontrunner of small business needs, followed by 16% of responses that requested clarity on processes or mandates, many of which were tied to accessing financial support. The third-most requested resource was reliable, accurate information.
It’s going to be a long slog. AWB says it will continue to the survey through the pandemic.