How Are Small Businesses Adjusting to COVID-19?
There is no doubt that COVID-19 has presented challenges for those working in the public health arena, and we also know that COVID-19 has had a major impact on the economy. Just how are America’s small businesses navigating the economic disruptions resulting from COVID-19? How will the CARES Act affect their current and future decisions?
To explore these questions, the National Bureau of Economic Research conducted a survey of more than 5,800 small business members of a North American online network, Alignable. The survey focused on evaluating 4 topics:
- The current level of financial fragility among small businesses,
- The extent to which small businesses have already temporarily closed and laid off employees,
- Expectations about how long the crisis will last and how this is affecting business decisions and
- Decisions about whether to seek funding through the CARES Act, and how this will impact layoff and closure decisions.
In their working paper, the authors observe that the survey results suggest that the pandemic has already caused significant disruption to small businesses.
The following main themes became apparent:
- Mass layoffs and closures have already occurred. 43 percent of businesses have temporarily closed, and businesses have reduced their employee counts by an average of 40 percent relative to January.
- Many small businesses are “financially fragile.” For example, of the businesses surveyed, the median business has more than $10,000 in monthly expenses and while having less than one month of cash on hand.
- Businesses have widely varying beliefs about the likely duration of COVID related disruptions. Some thought the pandemic would be over by the end of May, while others thought it would endure past July.
- While most businesses planned to seek funding through the CARES Act, many anticipated problems with accessing the aid due to bureaucratic obstacles and difficulties establishing eligibility.
As states across the country begin to reopen their economies, it will be important to not impose more barriers to being able to do so. Burdensome fiscal and regulatory policies will need to be replaced by more simplistic and transparent ones.
On April 23, the Platte Institute will be hosting a webinar featuring economists Ernie Goss, Ph.D., and Scott Strain, M.S.. The discussion will focus specifically on the impact COVID-19 has had on Nebraska’s economy as a follow-up discussion to an April 13 policy brief.