A Way Forward for Small Businesses

Businesses with fewer than 500 employees account for 48% of American jobs and 43.5% of GDP. Small firms are an essential part of the U.S. economy, but they’re often financially fragile. The Coronavirus Aid, Relief and Economic Security (or CARES) Act set aside $349 billion in loans and assistance for small businesses.

In our sample, 45% of small businesses were temporarily closed due to Covid-19. Total employment by these businesses declined by 40% since the end of January. The magnitude of the shock to demand for small businesses is hard to overstate. Most small businesses are extremely cash strapped. Without a credit lifeline or cash infusion, businesses will have to either cut their spending drastically or fold.

Small businesses disagree (a lot) about how long the crisis will last. Many businesses are unsure about whether the CARES Act loans will work for them. The government can’t promise that the Covid-19 pandemic will be over by any certain date, but it can be realistic about timelines and commit to a course of economic medicine that will enable the economy to reopen after then pandemic ends.

Findings on the Current Small Business Landscape

Large numbers of small businesses have shut down and laid off huge numbers of workers.
Most small businesses are extremely cash strapped.
A majority think they will be able to reopen by the end of 2020, but a large minority are less certain.
Small businesses disagree (a lot) about how long the crisis will last.
Many businesses are unsure about whether the CARES Act loans will work for them.

Five recommendations for navigating the current crisis