How to keep small businesses afloat amid COVID-19?
It’s indisputable that COVID-19 has had a significant impact on every facet of people’s lives and livelihoods. Amongst the hardest hit is the private sector, particularly small businesses that have suffered huge losses following partial and complete lockdowns earlier this year, amid efforts by governments to contain the spike in Coronavirus cases. Consequently, businesses have not been able to function in a normal manner, hence carrying the brunt of the economic impact of the global pandemic. On the other hand, some businesses have digitized their operations and services, which helped them to stay afloat, against all odds.
Small businesses overwhelmed
There have been mounting concerns among small business owners that they might not be able to get on their feet again, even when we get through the pandemic, considering the extensive damage they have already suffered. Many small businesses will still need massive bailouts to stay afloat.
To evaluate the impact of COVID-19 on small business, PNAS, one of the world’s most-cited and comprehensive multidisciplinary scientific journals, conducted a survey of more than 5,800 small businesses between March 28 and April 4, 2020. The results suggest that the pandemic had already caused massive dislocation among small businesses just several weeks after its onset and before the availability of government aid through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Across the full sample, 43% of businesses had temporarily closed, and nearly all these closures were due to COVID-19.
According to the survey, respondents that had temporarily closed largely pointed to reductions in demand and employee health concerns as the reasons for the closure, with disruptions in the supply chain being less of a factor. On average, the businesses reported having reduced their active employment by 39% since January. The decline was particularly sharp in the Mid-Atlantic region (which includes New York City), where 54% of firms were closed and employment was down by 47%. Impacts also varied across industries, with retail, arts and entertainment, personal services, food services, and hospitality businesses all reporting employment declines exceeding 50%; in contrast, finance, professional services, and real estate-related businesses experienced less disruption, as these industries were better able to move to remote production.
A sense of optimism
In this context, a study by Canada CIBC bank finds that the majority (81 per cent) of Canadian small business owners say COVID-19 has negatively impacted their operations, and many (32 percent) worry about the viability of their business over the next year. However, optimism for the longer term remains strong with most business owners (76 percent) confident they can rebound after the crisis. The majority (85 percent) agree with the uncertainty of how long COVID-19 measures will last is currently the hardest aspect to manage.
As small businesses continue to grapple with the extensive ramifications of COVID-19, governments need to come up with tangible bailout packages to help them recover and stand on their feet again not only in the short-term but in the long term, too, well after the pandemic is over. Failure to do so will see more businesses collapsing, hence aggravating an already worse situation. Governments, in this regard, can introduce Interest-free loans for small businesses and not-for-profits. A key takeaway here is that even though the support of governments is a matter of necessity, businesses ought to go digital to avert the colossal losses they have incurred due to the pandemic.