The COVID-19 pandemic will be effecting economies on every level for the next several months, possibly even a year or more. From the tiniest niche markets and local economies, through states, nations and around the globe, a severe economic slump is inevitable. It's going to be a struggle, but eventually, business will get better.
- No one on the team at Luxa claims to have a crystal ball that will give us the exact answers. We can only speculate about how many US dollars, businesses, or industries this economic downturn will affect. So, for safety's sake, let's assume it hits everyone, nationwide.
With that thought in mind, we can attempt to plan for the next few weeks and beyond. Here, we'll consider the current economic situation as it stands today, speculate on the near future, and discuss the proposed federal assistance and Small Business Administration (SBA) loans available for small businesses.
The US Economy as of March 21, 2020
We're not looking to spread panic, but we aren't going to mince words either. It's no secret that some sources are predicting the biggest economic contraction since the Great Depression. We're not certain things will get that bad, but we certainly expect a recession / depression reminiscent of the "great recession" of 2007 - 2009.
Before a small business owner gets panicked, we must consider how different our lives are now from how folks lived before the Great Depression or the housing market crash. Business owners of 2020 should recognize that:
- We were coming from a tremendous year for US businesses. 2019 was a banner year, even cited as a "Goldilocks Economy," when business is bustling along well, but not so hot to cause inflation.
- Unemployment was low, consumer confidence high, and personal savings and spending were at a peak. Both individuals and organizations are likely to have more funds put away for emergencies, and more credit available than in the past.
- The internet is more prominent than it was even in 2009, with nearly every financial institution and insurance agency able to function almost entirely online, reducing the need for cash transactions significantly.
- Modern technology has also changed the nature of work US employees do, and a good portion of workers will be able to work from home, at least to some extent.
- A Saudi-Russia oil price war has caused oil and fuel prices to tank. This is bad news for oil investors but good news for transportation, small businesses - and ultimately consumers - as gasoline and oil are available and affordable.
- B2C retailers that have a strong presence on the internet and quality e-commerce websites may notice a tremendous boost in online orders during weeks of quarantine.
However, brick-and-mortar businesses that rely on foot traffic - barbers, beauty salons, full-service restaurants - will surely feel the impact of quarantines, "lockdowns" and "shelter at home" orders.
To that end, many restaurant and service type industries are offering take out or delivery service (instead of seated dining), or advertising that their work can be done without entering a home or requiring direct human contact (like HVAC specialists and landscapers.)
On Lockdowns & Shelter-at-Home Initiatives - There are Some Benefits for Small Business
As of March 21, 2020, seven states have issued lockdown or "shelter at home" orders:
- New Jersey
- New York
Roughly 80 million folks are ordered to stay home and practice social distancing to slow the spread of the novel Coronavirus. As ports of entry, California and New York will likely be the hardest hit, both in terms of human casualties and economic struggles.
However, as the next few months pass, we'll see upswings in some sectors like transport, logistics, storage, energy and fuel. Looking forward, we cannot help but ask:
- Which businesses will come out ahead after COVID-19?
- Which businesses won't make it?
Ultimately, the organizations that innovate ways to offer their products and services to a home-bound audience will do best. If that's not an option for your business, a focus on community awareness, and an ongoing relationship with your customers will matter most.
We'll dissect that more in a moment. Right now, let's talk about financial assistance becoming available from the SBA to help small businesses weather the storm.
Low-Interest Loans from the SBA - (the Economic Injury Disaster Loan Program)
The SBA is working with individual state Governors to provide affordable loans to small businesses and non-profits that have been severely impacted by the Coronavirus.
The Economic Injury Disaster Loan program provides small businesses with working capital loans (as much as $2 million US) to provide crucial support to small companies, as we overcome a temporary loss of revenue.
At the time of writing, the SBA website says small businesses can apply for a low-interest loan due to COVID-19 in these states:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- Rhode Island
- South Carolina
- and West Virginia
Note that we expect more states to be added to the list, so check back on the SBA link above often. Small business owners can apply for the loans here.
There are also rumblings that these loans may be forgiven if the business keeps all employees on payroll throughout the crisis. However, at the time of writing, this is not yet official.
So, between a better economic starting point for businesses and consumers, great fuel prices, cash on hand and credit available, it seems more likely that many small businesses will survive the impending economic slump, especially if they are particularly innovative!
Small Businesses Should Focus on Innovation During Times of Crisis
Your local news is probably awash with clever ideas being launched by local small businesses. Fitness gyms, for instance, have taken to creating workout videos their clients can stream from home. Restaurants are offering take-out and delivery services, and salons are achieving top of mind awareness among their estranged clientele by publishing beauty how-to videos and product reviews.
- Social media is becoming even more critical for small businesses, who look to go beyond marketing and create a genuine dialogue with consumers.
Outsourcing specific tasks, like bookkeeping, payroll and HR, may become more popular among the smallest of organizations, who may look to streamline rather than take on an SBA loan. That's where Luxa can help. If these interesting times lead to a focus on expenses or a change in your workforce, we're here for you. Contact us to learn about our payroll, bookkeeping and HR services today.