To state the obvious, small businesses are in peril from the pandemic. Millions of small businesses have been forced to close their doors since March and now, new figures from Goldman Sachs suggest that more closings are likely if Congress doesn’t act with further relief.
It found that 84% of Payroll Protection Program recipients will exhaust funding by the first week of August and that only 16% of loan recipients are confident they can make payroll without further assistance from the government. Only 37% believe they can survive another shutdown.
Other surveys point to similar findings. “Small businesses have been using the PPP loan program to help keep their doors open and keep staff on payroll,” said Holly Wade, director of Research & Policy Analysis at the National Federation of Independent Business, in a prepared statement. “However, many small businesses are telling us this won’t last forever and anticipate having to lay off employees once they’ve used their loan.” The NFIB found that about 22% of PPP loan borrowers have or anticipate having to lay off one more employee after using their loan (up from 14% in mid-June).
To put these figures into context, it is important to grasp the devastation already visited upon small businesses. According to the National Bureau of Economic Research 3.3 million businesses were forced to shut down in April alone. It also reported that the number of active business owners in the US is down by 15% from February 2020, but up 7% since the low in April. African-American business owners continue to be the hardest hit by COVID-19 experiencing a drop of 26% in business activity from pre-COVID-19 levels. Latinx business owners fell by 19%, and Asian business owners dropped by 21%.
Another data point comes from Yelp’s quarterly Economic Average, which finds that as of June 15, there were nearly 140,000 total business closures on Yelp since March 1. The good news was that in April it reported more than 175,000 business closures, indicating that more than 20% of businesses closed in April have reopened. Las Vegas, NV, endured the highest number of closures relative to the number of businesses in the city (1,921 total closures), while Los Angeles, CA, had the largest total number of closures (11,774 total closures).
Of all business closures on Yelp since March 1, though, 41% are permanent closures. Yelp found that the largest spikes of permanent closures occurred in March, followed by May and June, indicating that the businesses that were already struggling had to permanently close right away and the businesses that were trying to hold on, but unable to weather the COVID-19 storm, were forced to shutter in recent months.