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COVID-19 continues to impact small businesses in terms of customer traffic, revenues and ability to operate amid government-mandated shutdowns, but there could be light at the end of the tunnel.
According to a study of 10,325 business owners conducted from January 9 through January 12, two-thirds of small businesses continue to experience negative impacts of COVID-19, and about 46 percent said the impact is significant. This represents a slight improvement from last month, which may be attributed to the passing of the third round of the Coronavirus Aid, Relief and Economic Security (CARES) Act stimulus coupled with multiple approvals of COVID-19 vaccines, according to Alignable, which conducted the survey.
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Meanwhile, 15 percent of respondents said COVID-19 has had a positive impact on their business and 17 percent said the pandemic is not having any impact on their business, according to the survey.
Cash crunch
Some small businesses are facing a cash crunch due to the pandemic, with about one-third reporting they have only one month or less of cash reserves available, while 44 percent said they have three months or more of cash reserves and 22 percent said they have 1 to 2 months of reserves. As such, a large percentage of small businesses said financial relief is important or critical to help them stay in business through the first half of this year.
The latest round of relief specifically targets hard-hit industries, but distribution is at a standstill, said Alignable. Among the provisions available to businesses are an extension and improvement of the Paycheck Protection Program (PPP); Economic Injury Disaster Loans (EIDL) that provide grants for eligible small businesses in low-income communities; new grants for shuttered industries like live venues, independent movie theatres, and cultural institutions; and extension of existing debt relief programs.
"With SMBs still experiencing a severe cash crisis, 80 percent of business owners anticipate pursuing additional relief funding under PPP round 3 which could require the new administration to make more funding available shortly after taking office," said Eric Groves, co-founder and CEO of Alignable.
"Most businesses see PPP as a bridge to get them to a time when recovery is possible and the majority of business owners recognize that can only happen with rapid distribution of the vaccine to all citizens. When we asked them what would have the greatest impact on their recovery in 2021, 58 percent chose vaccine distribution while 42 percent picked PPP relief."
Reeling from Q4, looking forward to May 2021
Meaningful economic recovery won't begin until the country gets the virus under control, which is not expected until at least May, according to the report. About 45 percent of respondents said they hope to reopen their business with the same level of products and services offered prior to the onset of the pandemic sometime after May.
Many small businesses are also feeling the effects of a dismal fourth quarter, which typically would be their most profitable time of year. Forty-six percent of small businesses surveyed said less than half of their pre-COVID customers patronized their business in December, and 72 percent of businesses experienced year-over-year declines in revenue during the fourth quarter. Many businesses do not anticipate much improvement as 2021 gets under way.
"With case levels continuing to rise across North America, it's clear business owners are anticipating further government restrictions along with a slow rollout of vaccines," said Groves. "As you might expect, in December, we also saw an uptick in concern over customers being afraid to return. Polls over the past few months have shown that increasing numbers of consumers are afraid of shopping on Main St. Unfortunately, they're opting to buy their goods online from major retailers, diverting that money away from struggling local retailers – and their own communities."
Keeping employees
Small businesses surveyed have managed to keep about 80 percent of their employees on their rolls, which represents a positive note as further declines in employment had been expected at the end of 2020. Business owners now appear to believe there will be a continued slow climb toward full employment, provided COVID cases are under control, said Alignable. Many small businesses are not hiring and are keeping existing staff occupied while normal operations are slow, and others are applying staff to expansions into other areas of their businesses, Alignable said.
Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM's Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism.
