More than one in five small business owners – 21% – say they will have to close permanently if economic conditions do not improve within six months, according to a survey conducted by the National Federation of Independent Business this month to assess the financial health of small businesses.
About the same number, 19%, said they will be able to operate no longer than 7-12 months under current economic conditions, respondents told the country’s largest small business association.
“The health crisis is not impacting small businesses equally,” said Holly Wade, NFIB’s director of research and policy analysis. “Small businesses are adapting to the abrupt shifts in consumer spending, managing customer and employees’ health and safety, and complying with state and local mandates, which are all creating additional stress for small business owners. Many of them still need more financial assistance just to keep their doors open and staff on payroll.”
MANY SEE HEFTY SALES DECLINE
Cash flow is a big concern. About half of the businesses surveyed had seen a decline of over 25% in sales since the pandemic began, and about a fifth have seen sales drop by over 50%.
Of the small businesses that were able to receive a forgivable loan through the U.S. Small Business Association’s Paycheck Protection Program (PPP), 84% said they have already spent the entire amount, up from 71% in July. Nearly half of PPP loan borrowers anticipate that they will need more financial help over the next 12 months. If offered, 44% said they would seek a second PPP loan.
The PPP program, however, ended Aug. 8, and Congress has not been able to agree on a relief package that would extend the program and potentially allow small businesses to seek a second loan.
In the survey, 35% of respondents said they applied for an SBA Economic Injury Disaster Loan (EIDL). Nearly three-quarters (74%) were approved for a loan and 9% said they were denied. About 18% still have not heard yet about the status of their loan application. The EIDL program is reportedly still accepting applications.
RECOVERY WILL TAKE A YEAR OR MORE, MOST SAY
Most small business owners surveyed said they do not expect business conditions to improve to normal levels until next year at the earliest. Only 19% said they expected conditions to improve to normal levels by the end of 2020. What’s more, 52% said it won’t be before sometime in 2021 and 20% said it will be sometime in 2022 when business conditions improve.
The U.S. CARES Act’s extended unemployment benefit funding hurt small businesses, respondents said. About 32% of respondents said the extra $600 per week that employees received “hurt their business by making it harder to hire or re-hire workers.” As a result of the $600 weekly payments, about 68% of workers received more income than they did when they were working, a report published by the Foundation for Government Accountability found.
The NFIB survey is the 11th in a series about the impact of COVID-19 and is designed to assess the impact of state and national coronavirus shutdowns on small business operations, economic conditions, and utilization of the targeted small business loan programs. The full survey is available here.
LOCAL SURVEY SAYS …
What is the small business pulse locally? In a survey taken in July by the Greater Miami Chamber of Commerce, almost half of South Florida small businesses said they have cut their staff during the Covid-19 pandemic and expect to cut more positions over the next three to six months, even though most received some kind of COVID-19 disaster relief assistance. Almost a third – 30% – said they did not know how the pandemic will affect their workforce or hiring over the next year.
The survey, produced in collaboration with MBAF and the South Florida Business Journal, found that 71% of local small businesses received a PPP loan, Emergency Injury Disaster loan or a tax credit between March and July 23.
In South Florida, 62% of respondents said they received a PPP loan, while 4% said their application was rejected.
The local survey also indicates local companies are becoming more comfortable with remote work. Before the pandemic, 59% said none of their workforce was remote. As of July 23, only 24% said they did not have a single remote worker, and 39% said almost all of their employees are working from home.
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READ MORE ON GROWBIZ, our series on cash flow:
Healthy cash flow keeps your business afloat. Here’s how to manage it.
Smart strategies for generating cash flow – in times of COVID and always
Cash flow is king: Be proactive, not reactive, to save your business