Small businesses are critical to the American economy. In fact, the country is 95% dependent on the goods and services provided by small businesses. Harvard Business Review reports that small, locally-owned companies employ approximately 58.9 million Americans and account for 47.5% of the private sector workforce (44% of the US economy overall). This sector was thriving until the emergence of the COVID-19 pandemic, which has caused an unimaginable disruption to daily business operations.
As a majority of American consumers practice social distancing and stay at home to mitigate the spread of the virus, the small businesses deemed “nonessential” have been forced to adapt or otherwise close their doors temporarily, causing major revenue losses. Some businesses may not feel any immediate effects as they adjust their service offerings in this new market, but the long-term economic impact of coronavirus could be catastrophic if small business owners don’t take preventative measures now to protect what they’ve built.
This article discusses which industries are at risk, what you as a small business owner can do to increase your chances of surviving and then thriving, and how you can apply for federal disaster business loans for your at-risk company during this difficult time.
Industries That Will Be Heavily Impacted by Novel Coronavirus
Due to novel coronavirus, people are no longer dropping off their dry cleaning, getting their nails done, picking up coffee every morning, going to pilates, or hitting local fashion boutiques to freshen up their spring wardrobes. Instead, consumers are hunkering down in their houses, ordering goods online, and minimizing their interactions with the outside world out of concern for public health. It’s easy to see why the nation’s capitals are reporting that business is down by 40%.
It is the same story in China and around the globe, and it’s impeding the ability of many businesses to get imported goods from their main supply sources. The NFIB Research Center says that 39% of small businesses have already felt the effects of supply chain disruptions and are struggling to maintain their businesses as a result. The 43% who aren’t feeling the effects expect to be impacted within the next 3 months if these trends continue, and the last 18% surveyed simply don’t know what to expect. Below are the industries experiencing the most impact:
The retail industry supplies goods that many people consider to be “wants” rather than “needs,” so when consumers scale back and make cuts to their budgets during a crisis, retail is one of the first industries to slide down the priority list. According to Ray Wimer, an assistant professor of retail at Syracuse University, retail stores usually experience the majority of the impact, and this holds true for the COVID-19 pandemic as well—but not only because of a lack of consumer demand.
The World Trade Organization says that more than 37% of global textile exports come from China and that most luxury manufacturing occurs in Italy. These 2 countries have been hit hard by the coronavirus, and their workforces have drastically decreased in numbers as a result of the lockdowns they’re experiencing, which has made it difficult for them to continue producing the exports that American retailers of all sizes rely on them to supply. These supply chain problems and falling sales have created the perfect storm for a great number of small US retailers, forcing them to close up shop.
Travel/Tourism and Hospitality
We’ve all heard how airlines, hotel chains, and other large companies in the tourism and hospitality industries have been impacted by COVID-19, but what about smaller communities that have been hurt by the decline in tourism? Locally-owned motels, tour guides, souvenir shops, and other tourism-centered small businesses are now struggling to survive as travelers are advised to stay home.
In New Hampshire, for example, tourism is the second-largest industry, bringing in over a billion dollars every year. Small towns like historical Peterborough draw in visitors from all over with breathtaking nature views and rich culture, but without travelers, this community has felt a severe economic impact as the sharp decline of travelers has caused a sharp rise in unemployment.
While streaming services and online entertainment platforms thrive in times like these, local movie theaters, playhouses, independent filmmakers, and film festivals suffer as they’re forced to close their doors and halt production for weeks and months at a time. A recent report stated that the film industry could take a $5 billion hit by delaying major movie releases. Sporting events, concerts, and other such events are also being canceled, causing major losses for many industries at once.
The food service industry employs over 16 million people and propels the economy in a vast number of communities. For those food establishments that haven’t been able to offer delivery, drive-through, or curbside pickup, consumer dollars are instead being spent at grocery stores. The Congressional Budget Office estimates that spending in this industry will temporarily drop 80% over the course of this pandemic.
Is Your Industry at Risk?
IBISWorld is a trusted industry research company that employs skilled analysts who use market trends, demographics, and economic data to provide helpful business insights to companies of every shape and size. This information empowers them to make smarter and better-informed decisions for their companies. If your business doesn’t fall under one of the industries mentioned above, IBISWorld has analyzed every industry by country and has provided an estimate of its fiscal risk during the COVID-19 outbreak.
You can use their “Industry Exposure” tool to get an in-depth look at your risk and help your small business improve its defense strategy accordingly.
The Silver Lining
Small business owners can take comfort in the fact that COVID-19 is not unprecedented. The outlook might seem bleak for nonessential industries, but after some time has passed, everyone will recover just as they have in the past. Consider this:
- The world didn’t end after Y2K
- We traveled again after the 9/11 attacks
- We overcame SARS in 2003, and Chinese hotels made a full recovery from the impact of that outbreak after just 4 months
- The 2008 fiscal crisis did not destroy the country
- We survived the 2009 swine flu
- ISIS did not succeed in taking our freedoms in 2015
Coronavirus will also soon be a distant memory that we learned from. The day will soon come when the country will change out of pajamas and go shopping for new clothes. We’ll turn off our TVs and see a play with our friends. Businesses in every industry will have customers again.
Until that time comes, there are things you can do to survive the pandemic and stay afloat. Consider changing your supplier so you aren’t dependent on struggling countries. Increase the price of your goods and services for the sake of cash flow. And last but not least, consider taking out a COVID-19 small business loan.
Funding Options Available to Your Industry
Earlier on in March, the US federal government slashed interest rates almost to zero in an attempt to counteract the economic impact of coronavirus, which is more than it has since the 2008 recession. Now is the perfect time to take out a small business loan while interest rates are as low as they can possibly be, according to Forbes.
The United States government and other governments worldwide are creating loan programs to help small businesses survive the pandemic and cover funding gaps while business is down. On March 27, 2020, President Trump signed the CARES Act into law, which provides relief for families and businesses that have been negatively affected by the coronavirus. Approximately $350 billion was reserved for small businesses in a government stimulus package to help prevent layoffs and closures while employees practice social distancing and stay at home. After the first round of funds was quickly depleted, a second round was approved to provide another $310 billion.
Your company could qualify for cash flow assistance under the CARES Act for up to 8 weeks if you have 500 workers or fewer. Additionally, your loan could potentially be forgiven if you maintain payroll and use the loan to cover the cost of rent, mortgage, and/or utilities.
The act also includes:
- A Paycheck Protection Program (PPP) for continued support of employee salaries, payroll, and more
- The cooperation of the Small Business Administration with state governments to provide $2 million disaster recovery loans (EIDLs) to small businesses to make up for the temporary loss of revenue
- Business tax changes, including delayed employer payroll tax payments, advance tax credits for necessary sick time/PTO, and an employee retention tax credit
This situation is continuously evolving, so keep up with local news sources to find out how government funding can support you through this tough time.
What Can You Do Now to Get the Funding You Need?
First and foremost, talk to your banker about the expanded SBA section of the CARES Act, as these institutions are in charge of administering SBA small business loans. You’ll also want to make sure you have the documentation needed to apply for loans and prove that you’re in good financial standing. This documentation includes tax returns, operating agreements, bylaws, certificates of good standing, statements, payroll information, and more.
You should also get in touch with a Lendio funding manager to discuss your options and what kind of funding you need to keep your head above water. We can help you decide which financing option is right for you and give you better approval odds for:
- The Paycheck Protection Program
- SBA loans
- A business line of credit
- Short-term loans
- A merchant cash advance
- A business term loan
- And many more
Apply for a COVID-19 Relief Loan
The second quarter of this year will surely test the limits of small businesses, but you can keep your head above water by securing business capital and remaining vigilant. A recession doesn’t have to be the end of your business if you rely on the coronavirus small business loan options available to you. Interest rates are lower than they’ve ever been, so there has never been a better time to apply.
To ensure that your industry is able to bounce back quickly after this economic crisis, turn to your primary financial institution to learn about all your COVID-19 small business loan options. If your company is reasonably healthy, you could get approved quickly and have critical funding in your hands in as little as 24 hours. All you need is some basic documentation ready to apply for these SBA small business loans. Get started today.