07 Jun Impact of COVID-19 on Small Businesses and a Way to Recovery
Entering into the year, the economy was on the rise. Borrowers were expecting significant liquidity from institutionalized lenders. Private money lenders were anticipated to be most active and the LTC percentages were going to rise, indicating an overall increase in risk appetite. After the worldwide spread of COVID-19 in February and the enforced self-quarantine as a measure; the financial structures were hit abruptly and harshly. This caused a partial to total shutdown of business operations for a lot of companies. Small businesses were among those first affected especially after realizing the key statistic that according to the National Bureau of Economic Research; about three-quarters of the small businesses have the cash to cover just two months of operations at most.
To counter such vulnerability and increased susceptibility of small businesses going under, the federal government has introduced various relief options like CARES Act Stimulus Package. The aim of these relief programs is to:
- Protect the employees on payroll by assisting employers in payroll payments and maintaining their workforce thereby reducing lay-offs and furloughs.
- Covering monthly debt service owners pay towards SBA loans.
- Assist in mortgage, rent and utility payments
- Repay existing obligations that are unpaid by corporations.
Small business owners need to be savvy and use all the resources available through SBA to mitigate the economic risks and minimize the reduction of revenue. Effective utilization of resources by owners is crucial for a small business to thrive especially during these challenging times.