As shelter-in-place policies are enacted and businesses are forced to close their doors because of COVID-19 (coronavirus), small business owners are asking themselves what the future brings. The past few weeks have presented unprecedented challenges. What can owners expect from the next few months?
Many economists are reluctant to attempt a complete prognosis on the US economy. Not many people know what to expect in the second quarter because policies around COVID-19 change almost daily. In the last few days of March, President Trump extended the federal social distancing guidelines for another 30 days, through the end of April. Americans were advised to stay away from public places and avoid gatherings of more than 10 people. These restrictions heavily impact many small businesses.
Despite the lack of concrete knowledge about how long the coronavirus pandemic will last, there are some predictions that paint a picture of the second quarter of 2020.
Q2 Predictions for Small Businesses
Economic activity is expected to drop in Q2. Treasury Secretary Steven Mnuchin said in a recent interview that a decrease in activity is an absolute, but the size of the drop depends on how quickly the coronavirus spread can be contained. Businesses, particularly those in the service sector, witnessed a drop in sales almost overnight as people across the country were asked to stay home in March. That loss of revenue will continue through April due to the federal government’s social distancing guidelines.
For those businesses that rely on foot traffic, including retailers, hair and nail salons, restaurants, entertainment centers, and more, there will definitely be a drop in sales for at least the first half of the quarter. Many states have ordered all nonessential businesses to close, making it impossible to generate any kind of revenue.
Economic forecasters expect that the annual GDP growth rate in the second quarter of 2020 could be -8% but could be as low as -15%. One study from the Federal Reserve Bank of St. Louis predicted that more than 47 million Americans could lose their jobs in Q2. About 67 million American workers are at risk of unemployment because they have jobs that are impacted by social distancing.
However, the study by the Federal Reserve Bank of St. Louis did not take into account the government stimulus package that was passed at the end of March. Under the bill, the federal government will deliver trillions of dollars to, among others, small businesses and the unemployed. COVID-19 loans will be available for small businesses through the SBA. Many business owners are hoping the funds from the stimulus package will help them weather the storm that Q2 is likely to bring. In fact, about 1/3 of small business owners plan to apply for some of the SBA disaster loans and other coronavirus business loans available at this time. They plan to use the funds to continue to cover their expenses, including payroll for employees.
While business owners are likely in for a bumpy ride the next few months, there is hope that economic activity could swing upward once the virus’ spread is more contained. In China, where the number of new COVID-19 cases is declining, factories are opening up again, and people are getting back to work. Consumer traffic continues to be relatively low, but there is hope that it will bounce back in the coming weeks. Economists hope to see something similar in the US once the lights come back on for small businesses.
In the meantime, small businesses are doing what they can to stay relevant. Some are donating food to local elementary schools, while others are reaching their audience through online platforms. They hope that when people are allowed outside of their homes, they will inundate the small, local businesses that continued to support their communities during their toughest times.
Navigating challenges is nothing new for small business owners. To get where they are, they’ve had to fight and show grit, making tough decisions while remaining optimistic through it all. That kind of tenacity will see them through this ongoing struggle. Your small business’s survival depends on how quickly you adapt and take advantage of the SBA emergency loans available to you during this time.
So How Can Small Businesses Make it Through Q2?
Your business’s ability to remain intact through this crisis is dependent on action. Small business owners can take steps to survive the coronavirus crisis.
Secure SBA or Federal Disaster Business Loans
Even if your customers are not spending money at your business, rent and employees must still be paid. Several different loan types are available to small businesses that provide economic relief during a temporary loss of revenue. Small businesses that qualify for these loans should apply as soon as possible to ensure they get their piece of the pie.
Here is a list of programs and resources available to small businesses during the COVID-19 crisis:
- Paycheck Protection Plan
- Economic Income Disaster Loans (EIDL)
- SBA Debt Relief
- 7(a) program
- Express Loan Program
- Deferred FICA Tax
- Net Operating Loss
- SBA Express Bridge Loans
If your small business is temporarily closed or struggling with a sudden drop in revenue, it’s time to get creative. Restaurants have started partnering with food delivery services, and small fitness gyms are setting up their cameras to teach classes from home. Find a way that your small business can still reach people who need your services.
Teaching online classes is one easy way to reach your audience and make some cash. You can either charge people to access your content or post the training videos for free and ask for donations. Brainstorm ways to meet your clients’ needs from the comfort and safety of their homes. If done right, you’ll create a loyal following of customers that will keep you afloat during the pandemic and will be ready to stop by your business the second your doors are open.
How Small Businesses Can Get a COVID-19 Loan
With interest rates at a historic low, small businesses would be wise to take advantage of the many coronavirus small business loan opportunities available to them. You can reach out to your business’s financial institution to start the process of applying for SBA small business loans. To expedite the process, make sure to prepare the necessary documentation beforehand.
The second quarter is sure to be a challenging time for small business owners. To make it through, they need to take action to secure the capital they need while remaining resilient.