The Impact of Coronavirus (COVID-19) & How Small Businesses Can Cope

The U.S. economy is heavily reliant on small business, with an estimated 95% of business operations dependent on small businesses for everyday goods and services.

Small business owners are no stranger to risk and uncertainty, but even the most well-prepared businesses can’t plan for every contingency. Until the economic impact of COVID-19 becomes clear, many small business owners are concerned about the uncertainty they will face over the coming weeks and months.

Read this post to understand the potential impact of coronavirus (COVID-19) on your small business and for our advice on how to manage your operations through the course of the pandemic.

As we continue to navigate the COVID-19 outbreak together, the long-term impact of the pandemic on both small and large businesses remains difficult to assess. Some industries, such as manufacturing, retail, food & beverage, and travel, will feel the effects more severely than others. Others may even see an increase in demand.

Large businesses often have cash reserves and sophisticated infrastructures to help weather the storm, but small businesses don’t always have this level of flexibility and may be more vulnerable to disruptions or complications related to:

• Capital access: Unexpected circumstances can strain a small business’s cash flow and financial capacity to fulfill payroll, maintain inventory, and react to market fluctuations like drops and surges in demand.
• Business closures: Some retail businesses have opted to reduce hours, but many have voluntarily closed their brick and mortar locations to slow the spread of COVID-19. Several jurisdictions in the U.S. and Canada have also temporarily suspended operations of restaurants, bars, recreational facilities, and many other businesses deemed “non-essential”. Online operations and package deliveries continue, as do restaurant deliveries, putting small retail businesses with an online store or delivery capabilities in the strongest position.
• Supply chain disruptions: Supply chain disruptions will have a disproportionately high impact on manufacturing businesses—particularly those who rely heavily on factories in China for parts and materials. Activity at Chinese manufacturing plants has significantly decreased in response to the COVID-19 epidemic, and is likely to remain depressed for several weeks or months. According to Harvard Business Review, U.S. firms are expected to begin feeling the pinch in mid-March, and many will respond with temporary closures.
• Inventory shortages: Retail businesses may also experience product shortages, particularly as consumers flock to stores to stock up on household goods. Roughly 20% of U.S. retailers’ supply chains involve distributors and suppliers located in China, and some estimate that losses for U.S. retailers could reach up to $700 million from March 9 to April 20.
• Market demand: Growing concerns about public exposure are encouraging more consumers to self-isolate. As a result, small businesses will likely experience a drop in revenue that may seriously restrict cash flow through the course of the pandemic, as well as after the threat passes. Some businesses, such as cleaning businesses, may also experience increased demand.
• Insurance issues: Many businesses have business interruption insurance, but not all policies will cover interruptions caused by COVID-19. Contact your insurance provider to understand what you are covered or not covered for.
• Workforce capacity: Your employees may not be able to get to work due to illness or quarantine, and not all businesses are able to support working from home or reduced workforce capacity.
• Facility cleaning: Many businesses are enhancing their cleaning and sanitation routines, which can impact costs and existing maintenance contracts.

Citing a survey from Veem, SmallBizTrends notes that “27% of businesses expect the coronavirus to have a moderate to high impact on their revenue, [and] another 30% expect the virus to have a moderate to high impact on their supply chain.” The same survey revealed that 52% of businesses are taking steps to prepare for an economic slowdown by increasing pricing, changing suppliers, decreasing operational costs, or protecting cash flow.

While some businesses are taking steps to safeguard their business or are pausing their plans to grow, others are seizing the opportunity to expand by increasing their online presence, building online shops, and developing more sophisticated remote communication capabilities, such as adding telemedicine services that enable doctors to diagnose patients using video chat or expanding their tech infrastructure to allow employees to work safely from home.

Other businesses are pivoting more substantially to provide support to their community, as well as workers in other industries—for example, two craft distilleries in Pennsylvania have switched from making spirits and cocktails to producing sanitizer and cleaning products. Instead of shutting down altogether, resourceful small business owners may wish to consider ways to adjust current operations to provide assistance or essential products to individuals or other small businesses in their community.

Whether you opt to scale back or scale up, small businesses need cash flow to secure their safety—and the safety of their customers and employees—in uncertain circumstances.

Amidst concerns about how widespread the virus and its resulting impact on small businesses will be, many would-be investors may be reluctant to provide small and medium-sized businesses with the funding they need to get by and continue to thrive after the threat passes.

Thankfully, the US Chamber of Commerce, SBA, and other lenders are ready to bridge the gap and support small businesses through the coming months.

• The Small Business Administration (SBA) is providing up to $7 billion in low-interest loans to small businesses impacted by coronavirus, with relaxed eligibility criteria that will make much-needed funding more readily available to businesses in states seeking an economic injury declaration. Loans up to $2 million “may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact,” the SBA said in a statement.
• The US Chamber of Commerce has created four task forces devoted to preparing small and medium-sized businesses for any potential long-term economic effects of coronavirus.

Greenbox Capital® stands united with our customers and all small businesses during this uncertain time. Here’s what we’re doing to support small businesses:

• We’re assisting our clients through the process of applying for Disaster Assistance funding through the SBA and whatever means possible in Canada.
• We are openly communicating with current and past customers to share urgent updates and provide support as needed.
• We are providing payment assistance to all existing customers showing a loss of revenue.

We understand that these are uncertain times for most small businesses. We’re committed to helping small businesses across the United States and Canada, and our Funding Advisors are standing by to help U.S.-based businesses navigate the application process for Disaster Assistance Funding from the SBA. We are closely monitoring what support is available for Canadian small businesses, and will provide whatever assistance we can.

Businesses that aren’t eligible for funding through the SBA or traditional lenders may be able to access the funds they need through alternative lenders. Contact our Funding Advisors to learn more about financial assistance available through the SBA or to discuss alternative lending options.