As the lockdowns begin to lift across the country, small businesses are preparing to reopen. However, even as the restrictions fade away, their concerns remain. Now, many small business owners are worried about having the solvency to survive.
Solvency is the ability of a company to meet its long-term debts and financial obligations. It’s crucial to stay in business. Unfortunately, many businesses in the hardest-hit industries (such as restaurants and hotels) are falling behind and are unable to pay their bills.
The US has experienced multiple recessions throughout its history, but this one hit different. Businesses were forced to shut down operations unexpectedly and indefinitely. “Bankruptcies and failures are sure to mount. There were approximately 8 million establishments prior to the COVID crisis, and I wouldn’t be surprised if close to 1 million of these firms don’t make it through to the other side of the pandemic,” said Mark Zandi, chief economist at Moody’s Analytics.
Small and medium businesses are responsible for half the employment in the US, so those businesses will be critical in reducing unemployment, a big factor in how quickly the economy can recover. The more small businesses fail, the longer the recovery will take and the more difficult it will be to reduce unemployment.
Small businesses have little in the way of financial resources and were generally unable to take advantage of the Paycheck Protection Program.
Wondering what you can do to help? Shop local! Order online, buy gift cards and tip service workers a little extra.