COVID-19 has most small businesses in financial limbo

With the vast majority of companies nationally classified as small businesses, it's no wonder they're called the lifeblood of the U.S. economy. Over the past month, however, due to the mitigation efforts designed to control the coronavirus outbreak, the country's beating heart is on life support. Mom and pop shops, boutiques, salons and restaurants are operating with skeleton crews and have laid off millions of people. In fact, over a three-week period, nearly 17 million Americans filed for unemployment benefits. And that doesn't take into account the millions more who are either waiting to do so or who have decided to live off of their savings.

Citizens, business leaders and families are left to wonder: When will life get back to normal? While the White House is aiming for May 1, that target is more of an aspiration than a certain date.

Time will tell, but the longer the shutdown goes, the greater the chances "temporarily closed" signs will be replaced by "out of business" notices.

1 in 4 are two months away from closing permanently
As detailed in an eye-opening survey conducted jointly by MetLife and the U.S. Chamber of Commerce, nearly a quarter of all small businesses in America are within two months or fewer from bankruptcy. Of these, 11% say their point of no return is inside of a month.

When including the estimated 24% of small businesses that have already ceased operations and the 40% who expect to do so in two weeks or less, it translates to a majority of small businesses who are in dire straits economically.

Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, said that the financial toll of COVID-19 has been indescribable.

"Small businesses have taken an enormous hit from the disruption caused by the coronavirus outbreak and we don't want small businesses to fail because they aren't aware of what's being offered," Sullivan explained. "The Chamber has created numerous step-by-step guides to quickly help small businesses access the financial aid they need and better understand the relief available through the CARES (Coronavirus Aid, Relief, and Economic Security) Act."

Loan forgiveness not enough incentive to stop layoffs
Late last month, Congress unanimously passed and President Donald Trump signed into law the CARES Act, which provides $349 billion in federal loan programs to small businesses. If recipients apply for such a loan and use the funds to continue paying their staff, then they may not have to pay it back.

Unfortunately, economic realities have prevented many entrepreneurs from taking advantage of this perk, given how much of their ongoing revenue goes toward payroll.

These are very tumultuous and confusing times for small businesses given the uncertainty of when the pandemic will end. Hudspeth Law Firm can provide you with the sound consultation and customized advice you need on employment issues, layoffs, furloughs and more so you can gain direction for how to proceed. Contact us today; we'll all get through this together.

Categorised in: Business Law, Starting a Business in Arizona

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