Restrictions and closures due to COVID-19 have forced small businesses to cut staff, reduce their services to curb-side pickup and lose profit. Even after Missouri opened businesses back up after more than a month of being closed, there are still concerns they won’t be able to rebound from the economic blow of COVID-19 restrictions.
Lack of reserves for small businesses
Director of MU’s Financial Research Institute Dr. John Howe said local companies face challenges like not having enough cash reserves to negate their lost profit. He said small businesses may have enough reserves to get through a few months of lost economic profit due to restrictions and pandemic concerns, but they might not have enough to stay open past those first three months.
Missouri Main Street Connection is a network of over 140 commercial districts with thousands of small businesses. The organization conducted a survey last month to evaluate the impact of the COVID-19 pandemic on small businesses. Over 600 small business owners responded, according to a press release.
56% of businesses indicated that they would be at risk of closing permanently if business disruption continued for up to five months. 27% stated they would be at risk of closure if disruption continued for up to three months.
Finding and holding onto workers
Another issue small businesses face is trying to hold onto their workers. There’s a possibility some workers have left to go to other jobs when their employer had to close.
Howe also said some local businesses, such as restaurants, rely heavily on student employees. And with MU moving to online classes for the summer and possibly fall semesters, businesses will be struggling to find workers to replace these students.
Public’s hesitance to go into restaurants
Another obstacle for restaurants could be public reluctance to head back into dine-in service. Even though the government has allowed restaurants to offer dine-in services, the public could be hesitant to go out due to fear and confusion about the risk of infection and harm of the disease.
Economic relief options for small businesses
The U.S. Small Business Administration began offering Missouri businesses low-interest federal disaster loans on March 21. These SBA Economic Injury Disaster Loans are allowed to be used for payroll, fixed debt and other bills that can’t be paid due to the COVID-19’s impact. Applicants can apply online here.
These SBA loans include a $10,000 loan advance, the SBA covering six months of interest from loans and a $25,000 loan advance for businesses who have a business relationship with an SBA Express Lender.
The most prominent of these loans is the Paycheck Protection Program, a federal program meant to give low-interest loans to small businesses.
On the SBA’s website, it states the program will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, utilities, rent or mortgage interest.
Problems with depending solely on SBA loans
Loopholes in this program have allowed some larger companies to take these loans away from smaller businesses. These loopholes include any hotel or restaurant chain, no matter the size, can claim a PPP loan. Manufacturers that have offshored production are also eligible for these loans.
Howe said these loan programs and other ideas such as rent and bank loan forgiveness are short-term proposals meant to slow down economic loss.
“It is kind of a Band-Aid on the bigger problem,” he said. “If the economy rebounds fairly quickly, the Band-Aid might be enough to staunch the financial bleeding and allow these firms to come back.”
Importance of other policies to combine with fiscal relief
Howe said other policies aimed at increasing confidence in employees heading to work and consumers heading into small businesses is necessary to have a faster economic rebound.
He said a possible policy to blend with loan and rent forgiveness is a reopening plan based off of age, allowing younger people who are less at risk to develop dangerous symptoms of COVID-19 to head back into the public sphere earlier than older, more at-risk people.
While allowing younger people to participate in the economy could lead to more positive cases of COVID-19, it could also lead to a faster financial revamp with more workers and more consumers.
Another idea is to prioritize public health research and testing of the disease, which could lead to consumers and workers finding out that the disease’s harm is decreasing. If there is more transparency about the disease and its effects, it could prompt more worker and consumer confidence.