When the first wave of business closures hit this spring, many of the companies involved were already in trouble. Or, their owners were ready to close for other reasons, like a pending sale or retirement.
Those that survived have been hurt. Many received crucial help through the Paycheck Protection Program, which provided hundreds of billions in grants and loans. Many were kept on the map by consumers who had a little extra to spend because of federal stimulus checks and supplemental unemployment benefits.
Restaurants stayed open, in part, because summer allowed for outdoor dining. Summer generally allowed commerce to continue without too much virus risk.
But summer is coming to an end. Is your business prepared to hang on? A resurgence of the virus this winter could cut into already meager prospects.
According to the Commerce Department, consumer spending rose modestly in July but was still below pre-coronavirus levels. Spending is unlikely to surge this fall without new unemployment assistance.
Businesses are barely hanging on now
According to the New York Times, 20% of all businesses that were open in January are now closed, at least temporarily. A survey by the Census Bureau found small business owners growing more pessimistic. In April, around a third of them said they thought business would take six months to recover. Now, almost half said that, and another 7.5% say that their business might never fully bounce back.
What consequences can we expect from widespread business failures?
Almost half of all American workers work for companies with less than 500 employees. That means millions of jobs are on the line. New businesses are bound to come in to replace those that fail, but the process of building a company from the ground up is lengthier than reopening existing businesses.
Small businesses have had a more difficult time with the downturn. Many larger companies have been able to rely on low-interest borrowing and were able to invest in supply chains and distribution systems. Small businesses have had less access to credit and less clout when renegotiating with landlords and business partners. As a result, there has been additional consolidation.
Is there time to limit the damage of another wave?
According to the Times, the Paycheck Protection Program ultimately provided over half a trillion dollars in low-interest and forgivable loans. The assistance was probably crucial in saving many businesses. That program lapsed in August, however, and there is no guarantee of another such program.
If your business is struggling, now may be the time to invest in a good business law attorney. Your lawyer can help you determine if your problems are solvable and, if not, help you wind down your business while minimizing losses.