More Than Half Of America’s Small Businesses May Be Gone By The Election. Literally.

Another day, another survey suggesting Main Street is teetering precariously on the precipice of oblivion.

According to the Society for Human Resource Management, more than half of America’s small businesses will exhaust their capacity to keep going by the end of October.

The study polled 375 firms between April 15 and April 21. 12% said they can last “up to one month”, while a full 20% said they can make it more than 30 days, but may be out of business within three months. Just 34% expressed confidence in their own viability past six months.

Business owners are generally divided about the adequacy of the policy response from local and federal governments. Slightly more respondents disagreed with the notion that Washington has done enough. In other words, business owners have a marginally more favorable view of their own state’s response to the crisis.

Disconcertingly for the White House, more than 20% of those surveyed were unfamiliar with the Paycheck Protection Program.

The breakdown betrays a stark divergence. 84% of businesses with 100-500 employees were familiar with PPP, but only 60% of small business owners with 2-99 employers had heard of the government’s flagship rescue program. That’s especially remarkable given that the survey was conducted during the very same week when PPP was in the national news every day, as lawmakers and Steve Mnuchin wrangled to get the program topped up after it ran out of funds.

Around 49% of employers said the PPP had influenced their decisions to retain or rehire employees. Of the 51% who said it had not, 14% were unaware of the program’s existence.

A third of small businesses do not plan to apply for any relief. Here is the breakdown of the rationale behind those decisions:

As a reminder, PPP loans are forgivable assuming certain conditions are met. In other words, these are essentially grants.

More than 40% of those polled said PPP money will probably arrive too late to save them, or already has arrived too late. That gives you an idea of why critics were furious with the likes of Shake Shack for accepting PPP funding. Even as large businesses (including Shake Shack) are returning the money, the time it spent sitting in corporate coffers may have been the death knell for the businesses who really needed it.

Here’s how I put it “Shake Shack Tycoon Says You Can Have Your $10 Million Back“:

…because $349 billion (the original amount appropriated for the PPP) is a finite number, it is impossible that Shake Shack did not understand that by taking $10 million, it was depriving someone else of that same $10 million. And because actual small businesses weren’t applying for anywhere near $10 million at a time, that “someone” who was deprived is actually multiple someones.

Shake Shack raised $150 million in equity shortly after taking a PPP loan for $10 million.

The SHRM survey made the rounds on a day when the latest ADP report showed small- and midsized businesses were disproportionately affected last month as the economy hemorrhaged tens of millions of jobs. Businesses with between 1 and 499 employees shed 11.3 million positions from March to April. That was around 2.3 million more than large employers.

Also on Wednesday, preliminary findings from a study by the New York Fed suggest PPP funds aren’t being allocated to the areas where they’re ostensibly needed the most.

Specifically, Fed researchers note that “the economic impact of COVID-19, both measured by the number of COVID-19 cases per capita and by the number of initial unemployment claims per capita, does not explain the geographical distribution of PPP loans”. Rather, it’s “lenders’ preference for borrowers with an existing relationship and the market share of community banks” that matters when it comes to explaining geographical variation in PPP funding.

When SHRM asked respondents who reported COVID-related losses about the scope of the decreases, 41% said revenue had fallen by more than 30%. 13% reported a “total loss”.

If half of America’s small employers were to go under, that would mean the disappearance of 14 million businesses.


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7 thoughts on “More Than Half Of America’s Small Businesses May Be Gone By The Election. Literally.

  1. Who are these people who are running small businesses but apparently have little or no idea what is going in the world? I mean, really, people, you need to have a clue.

  2. I applied for one. Trust me, it is not so easy. Just finding a lender who would take the application was tough. The big banks did not want to deal with small borrowers. The first round was almost impossible to apply for unless you had an inside connection at the bank. As I never borrowed before with my lender, I was at the back of the line. I finally found a fintech lender who was set up to accept an application from a small firm with a 1099 schedule C but had to put in the paperwork twice as their system did not seem to take it the first time.

    1. Sorry to hear that. Implementation, especially with respect to round one, was pretty dismal. But this — “only 60% of small business owners with 2-99 employers had heard of the government’s flagship rescue program” — is…disturbing.

      1. Most people in the world don’t have a clue about most things in life, important or not. This is not surprising at all.

      2. Besides, if you run an actual small business, unless you have taken great pains to get connected to the financial world you don’t get much attention. If you use Square and Quick Books you might have gotten an alert, but that’s a guess. There’s really no money to be made for a bank in a “relationship” with a business that employs 10 or 20 people. In today’s ZIRP world even a nice checking account offers the bank little in the way of earnings. You are probably too risky for the bank to make you a loan so they are just not set up very well for folks like this. No contact, no benefits. Iif they are still even open these guys aren’t sitting around listening to Trump and his “team” of folks who, in truth, have no use for the “little people.” If these small firms are still open they are too busy to be keeping up with news that actually has no actionable content. I ran a small business support center for several years and it’s not just those folks who have no clue, it’s also their critics.

  3. H-Man, the little guys are always at the back of the train. But the little guys drive the train. If we don’t have the little guys, that train is going to derail.

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