Usually the new year is a time for unbridled optimism about what’s to come. And why wouldn’t US small businesses be bullish on the new year? There’s a new round of stimulus and PPP loans on the way, a new incoming administration in the White House, and a long-awaited COVID-19 vaccine has finally arrived.
But American small businesses are not optimistic going into the new year. In fact, many are terrified they won’t even survive 2021, with many businesses nationwide closing at an alarming rate because of the current dismal economic conditions.
According to a new survey by small business referral network Alignable, half of small businesses worry they won’t last another 6 months, and they could be forced to close by this summer because of a worsening economic situation.
Alignable’s poll was conducted in the first week of December. So the 6,300 small businesses that responded already knew about Joe Biden’s presidential win, as well as the new coronavirus vaccine. Yet they were still deeply concerned that it could soon be curtains for the businesses they’ve dedicated their lives to.
Nearly Half of Small Businesses Are Worried About Surviving 6 More Months
The most shocking statistic in Alignable’s findings is that among US small businesses, “only 43% are confident they’ll survive through June 2021.” That means that nearly half of all American small businesses are not confident they’ll survive even another 6 months under current conditions.
That gloomy assessment does come with an important caveat, though. The report notes the “critical role additional financial relief will play in supporting the small business economy through the crisis and into the recovery in 2021.” In other words, they do see a path to survival if the federal government passes another COVID-19 stimulus package—and gets those benefits out quickly—as they see the clock ticking down on the continued existence of their businesses’ as a matter of months.
Why Businesses Are More Pessimistic
Small businesses’ level of anxiety is very clearly tied to the second surge of coronavirus cases—one that’s far worse than at any previous point in the pandemic. This increase has brought a renewed round of closures and strict safety restrictions along with it.
In California, businesses that had invested significant resources in reopening were forced to close again in November. Similar renewed or new lockdowns were instituted in Oregon, New Mexico, and a number of other states. Much of America felt like we’d turned a corner on this awful episode in the autumn, only to see us relapse into a very grim COVID-19 backslide as we progressed into the winter.
“The financial impact of the COVID Crisis saw a massive reversal in November, with the percentage of business owners experiencing significant impact jumping 7% to 50%,” Alignable found. “The last time we were at or above 50% was back in June.”
Alignable’s nationwide survey found that fewer businesses are open, regardless of their state’s level of restrictions. “We also saw a significant decline in businesses reporting their status as ‘fully reopened’ over the past 2 months” of October and November of 2020, according to the report. As many small businesses know firsthand, once you’re closed, you have serious worries that you may never reopen again.
Which Small Business Sectors Are the Most Worried
You won’t be surprised to hear that the types of business most worried about reopening again are the very business sectors that state and local governments have ruled cannot remain open—or are those operating under severe restrictions on their ability to do normal business. Here’s what Alignable found about what percentage of small businesses in which sectors feel they are at risk of closing down permanently in the not too distant future.
- Travel/Hospitality: 62% feel at risk of closing
- Gyms and Fitness: 61% feel at risk of closing
- Beauty Salons: 60% feel at risk of closing
- Restaurants: 45% feel at risk of closing
- Entertainment: 43% feel at risk of closing
Certainly hotels will have trouble bouncing back because travel has been hard hit as COVID-19 gutted the tourism industry. Gyms face serious challenges operating under these new restrictions. Salons are struggling to maintain their future client base whenever they fully reopen. Bars and restaurants are being forced to get creative to make whatever few dollars they can under these very difficult circumstances in hopes of keeping some staff employed even if they’re losing money in the short term.
Small Businesses Need More Financial Relief
It feels like a broken-record question to keep asking whether there will be another stimulus package given how slowly the government moved on this front through much of 2020. But the pandemic restrictions are now in their 10th excruciating month, which is far longer than many knowledgeable economists thought this would last. With businesses closed and unemployment back on the uptick, government relief is the only major practical option for most US small businesses and employees.
The original CARES Act and Paycheck Protection Program (PPP) loans were only intended as a short-term fix for a couple of months. The pandemic has dragged on far longer than that, as has the suffering among small businesses as the federal government failed to act.
One thing could turn this dismal situation around—and in a hurry. “85% of small business owners consider additional financial relief significantly important for their survival until mid-2021, when we are all hopeful this crisis will be under control,” Alignable concludes. If the new Democratic-controlled US government could put together the effective stimulus package that somehow eluded the previous Congress for so many months, we might be back on track to reopen the US small business economy in a way that leaves us ready be fully restored and safely open for business in the manner that so many businesses and workers need.
All of this depends on an effective COVID-19 vaccine rollout and stimulus strategies that work for small businesses. The new year may bring small businesses hope for that.