Americans all across the country are being urged to remain in their residences and practice social distancing, as more and more local and state governments are issuing stay at home orders. As a result of the social isolation required to manage the state of the COVID-19 pandemic, over 10 million Americans have filed for unemployment. It has been estimated by the Federal Reserve Bank St Louis District that job losses could total up to 47 million, an unemployment rate of 32%, exceeding that of the Great Depression. While these projections may be impacted by the $2 trillion coronavirus relief act allocating financial relief programs, it is fair to say that no individual or business will be unaffected.
Possibly the most affected by the implications of this crisis, will be the small businesses that are vital to the health of our nation’s economy, providing a GDP contribution most recently recorded to be $5.9 trillion. Before the pandemic, small businesses employed 58.9 million people in the United States, nearly half of all the employees in the private sector. In order for small business in America to survive this health and economic crisis, there are three strategies that should be top of mind.
1. Lobby for Liquidity
Prior to the pandemic, driving a small business forward was already an uphill battle. Approximately only half of small businesses in America stayed open past 5 years according to the Small Business Administration. This is typically due to the lack of cash flow to cover the heap of expenses that coincide with any small business; rent, utilities, payroll, cost of goods, liquid cash flow to the owners, etc. With the impending obstacles ahead, including decrease in revenue due to slowed services, expenses of transitioning to a virtual business, financial distress and low morale of employees, and difficulty obtaining investments, the entrepreneurs and small businesses of America will quickly reach a breaking point.
The best way for small business owners to address this liquidity concern is to lobby for state and federal governments to provide immediate assistance with cash flow to cover expenses. Entrepreneurs and owners can support proposals such as the “Small Business Workforce Stabilization Fund,” which would forgive financial assistance provided to small businesses that were financially stable pre-pandemic, and maintain the same number of employees a year after the crisis. Additionally, this legislation proposes to increase the SBA Express loan limit from $350,000 to $1 million. Proposals such as this will keep small businesses afloat that will otherwise have to shut down and further contribute to the growing number of unemployed Americans.
2. Capital is Crucial
The largest contributor to cost of goods is almost uniformly payroll expenses. And while loans provided by the SBA solve an immediate problem, they can also add financial pressure on owners whose debt has increased and have to allocate funds to pay back fees right away. These pressure often lead to owners making the difficult decision to resort to lay-offs.
A good solution to assisting small business owners with these expenses is the proposed $300 billion relief plan titled the RESCUE (Restoring Economic Security, Confidence, and User Endurance) Business Act. With this legislation, the SBA loan limit previously mentioned would be implemented so that small businesses can cover costs and ensure working capital. And all SBA 7(a) loan fees would be waived for one year, and a 90% loan guarantee would be implemented.
3. Participate in Local Politics
American activist Gloria Steinem summed up the importance of your action when she stated, “The future depends entirely on what each of us does every day; a movement is only people moving.” The voices of small business owners can make a powerful impact on the direction of our nation’s economy, if they are heard. If you stay silent, massive corporations will speak for you and make crucial decisions about economic policy and emergency financial relief legislation that will decide the future of your business.
If you are looking for a way to have influence, engage with your political leaders via social media, emails, phone calls, or even a traditional letter, and express the urgency of your need for financial relief. According to the Harvard Business Review, “franchising stands to lose 26,500 small businesses due to COVID-19 alone and the wrong legislation will raise the number of closures to 33,000. For small businesses outside of the franchising industry, this number could be even higher.” You can protect your small business by maximizing liquidity, accessing capital, and doing your part to push the legislation that will determine our nation’s economic future.