In the early months of the ongoing COVID-19 pandemic, everyone knew that there would be an uncomfortable air of uncertainty surrounding the economy for the foreseeable future. Truly, we had never seen something that devastating happen that quickly before - especially to the point where our normal lives essentially stopped as a result.
Now, nine months on from the outset of COVID-19, small businesses in particular are coming to grips with the fact that things still have not returned to normal. Not only that, but with infected numbers increasing all across the country, it's looking more and more likely that we'll be facing another round of restrictive lockdowns sooner rather than later. With a new Coronavirus stimulus bill sitting deadlocked in Congress, all of this demands the question: can your average small business even survive under these conditions? How many have already closed permanently and how many will be right behind them? The answers to those questions require you to keep a few key things in mind.
According to the Economic Impact Report released by Yelp in September of 2020, permanent small business closures across the United States hit 97,966 – or roughly 60% of all businesses that have had to close at some point during the pandemic. Not only that, but there was a massive 34% increase in those numbers in the two months since mid-July, pointing to a situation that is only going to get worse before it gets better.
But a small business closure at this point is more than just a loss to the surrounding community. If things get too out of control, it could create a negative ripple effect that will permanently damage the entire economy. Take North Carolina, for example, where there are approximately 935,000 small businesses. That number accounts for not only 99.6% of all businesses in the entire state, but they also employ 45.3% of the state's private workforce, too. As more businesses close, more people are out of work – thus unable to support the remaining businesses, inevitably triggering more closures in their wake.
The service sector is being hit particularly hard, according to research conducted by the United States Chamber of Commerce. Greater than 82% of all jobs lost since the onset of the pandemic in February have been service jobs. Retail jobs in particular are down 4%, while leisure and hospitality jobs are down roughly 25%. On the one hand, those numbers make sense as you'd be hard pressed to find someone who is excited about staying overnight in a hotel room right now (if they’re even able to travel). But at the same time, if hotels begin to close, it's hard not to see the impact to the surrounding communities once again.
Even after a vaccine is upon us and the COVID-19 pandemic has finally passed us by, this is the type of economic damage that it will literally take generations to recover from.
Thankfully, despite the fact that a COVID-19 relief bill has literally been sitting in the Senate without a vote for months on end, it appears that the support small business owners need may finally be in sight. Unfortunately, it's just that this help may not arrive until January at the absolute earliest.
President Elect Joe Biden has already urged Congress to approve a $3.4 trillion stimulus plan in an effort to keep both people and businesses afloat as the virus continues to make its way across the United States. This would include not only another round of $1,200 direct payments for taxpayers, but also $600 in new federal unemployment benefits as well. This, coupled with new small business loans, assistance programs for both state and local governments and additional funds for virus testing and contact tracing, would go a long way towards easing the burden that a lot of people are feeling right now.
Unfortunately, Business Insider reports that there is no indication that Senator Mitch McConnell and House Speaker Nancy Pelosi are actually negotiating on the bill right now.
Republicans on the other hand have pitched a $500 billion relief plan, though it has been rejected by Democrats both times. This included $300 in weekly federal unemployment benefits, additional small business aid, as well as funding for healthcare systems and schools across the country. Most interestingly, what it did not include were additional $1,200 direct payments for taxpayers, along with assistance for state and local governments. The Democrats have indicated that these two points are non-negotiable and up to this point they've certainly been sticking to their guns. They say that these two elements are critical in terms of helping people get safely back to work ahead of the release of any type of vaccine next year.
Biden, to his credit, remains steadfast about his proposal. He said that it was essential for lawmakers to pass either his Coronavirus relief package or another during the lame-duck session right now, before they adjourn in the month of December. He was quoted as saying the "refusal of Democrats, Republicans to cooperate with one another is not due to some mysterious force beyond our control. It's a conscious decision. If we can decide not to cooperate, we could decide to cooperate."
Whether or not any of his colleagues on either side of the aisle will listen to this advice remains to be seen.
Beyond that, one thing is for sure: the economic situation is dire and without some type of additional relief, more small businesses will close in the not-too-distant future. What happens between now and then? No one yet knows. One thing is certain: this is a situation that will impact all of us, for better or worse, before this is over.
About Sonu Shukla, CPA, CFP
Sonu Shukla is a Certified Public Accountant as well as Certified Financial Planner. He believes in proactive tax planning and has the skills, education and experience to demonstrate passionately planned financial strategies. His firm tailors highly efficient tax plans for his small business clients, all in a one on one environment where he and the client can bounce ideas around until every detail is worked out. Located in Orlando, FL, he services all of Florida.
