There are roughly 30.2 million small businesses in the United States. Many of these businesses are stressed and fighting to keep their company going during this crisis due to many states issuing shelter-in-place orders. Read the article below to learn what small businesses need to survive the coronavirus crisis. For more information on the services we offer or if you need help navigating your business during this stressful time you can call us at 540-443-9272.
As local and state governments issue shelter-in-place orders, asking residents to remain home for all but essential errands, businesses — especially small local businesses — across the U.S. are facing difficult decisions. These institutions are crucial to our nation’s economy, employing 58.9 million people in the United States, or about 47.5% of the total private sector workforce. Their GDP contribution measured $5.9 trillion in 2014, the most recent year for which small business GDP data is available.
My company, FASTSIGNS International, is included in these measures. We are a franchise brand with individual units owned and operated by local entrepreneurs. Businesses like ours support other businesses and organizations by providing signage and visual graphics for conferences, trade shows, events, point of purchase displays, and promotional advertisements. Suddenly — but understandably — demand for these services has dropped. Our business isn’t alone. I am also the chair of the International Franchise Association, and in the past weeks I’ve watched the small businesses that make up the franchise industry struggle with dwindling sales due to this unforeseen economic crisis.
It’s important that small businesses across America weather the pandemic. They — we— are vital to the nation’s economy. But in such an incredible crisis, how? Here are three ways entrepreneurs can protect themselves.
1. Secure liquidity
One of the key challenges for small businesses is access to cash. Running any business is a risky endeavor; however, small businesses are particularly vulnerable. According to the federal government’s Small Business Administration, only about half of small businesses last longer than five years. Overhead costs like rent, payroll, and utilities leave very little liquid cash to owners, especially in the early years. Add to that the lack of revenue from slowing services and newly required benefits stemming from the pandemic, and our entrepreneurs will be devastated.
In order to combat this short-term challenge, small business owners should advocate for efforts to provide immediate liquidity and keep businesses solvent. Under one proposal, the “Small Business Workforce Stabilization Fund,” the Treasury would forgive financial assistance provided to those small businesses which were solvent prior to the crisis, so long as the same number of employees are rehired within a 12-month period after the crisis. This program would provide immediate cash flow to the most vulnerable businesses, keep employees on payroll, and allow businesses to grow once customers return. The legislation would also increase the loan limit for SBA Express from $350,000 to $1 million. I believe proposals like this are critical tools to stabilize the market and provide relief for owners, workers, and their families.
2. Ensure access to capital
For franchise businesses, liquidity is just part of the equation. The cost of goods sold in the service industry is primarily wages paid to staff. Debt loads from Small Business Association loans are common for small businesses, and can create additional pressure on business owners. With demand down and paid leave provisions now a reality, layoffs are a real concern.
In order to help small businesses make payroll and cover expenses — including paid sick leave, paid FMLA, and loan repayment — a relief plan tailored to small businesses is in order. And in my view, the proposed $300 billion Restoring Economic Security, Confidence, and User Endurance (RESCUE) Businesses Act of 2020 would do just that. Under this proposal, the SBA would waive all fees for all 7(a) loans for one year for both lenders and borrowers and provide a 90 percent loan guarantee for all loans, no matter the size. The legislation would also increase the loan limit for SBA Express from $350,000 to $1 million and give local businesses the breathing room they need to remain in business and thus maintain staff in light of the health crisis.
3. Engage with policy-makers
Proposals in Washington calling for billions in aid to small business are enormous, and may feel out of reach as we work from our towns, miles away from our nation’s capitol. But our voices are crucial in this moment of crisis, and we cannot leave big business to speak for us when it comes to emergency stimulus or any economic policy that impacts us.
This can be done individually and it can be done in partnership with other entrepreneurs; the mediums for engagement are endless. Social media, letters, email, phone calls are all effective ways to engage. The method is less important than the message, and the message is this: small businesses are the lifeblood of our communities and economy; we need relief in the midst of this crisis.
The small businesses within our communities provide jobs and economic growth to local economies. This is where most Americans are feeling the impact of the pandemic — our coffee shops, restaurants, gyms, and pet stores are all closed; our friends and family members are losing jobs.
It’s time to take action. As the adage goes, an ounce of prevention is worth a pound of cure. In this pandemic environment, this wisdom is just as much for small business owners as it is for their patrons. Franchising stands to lose 26,500 small businesses due to COVID-19 alone and the wrong legislation will raise the number of closures to 33,000. For small businesses outside of the franchising industry, this number could be even higher. Accessing the capital you need and maximizing liquidity now are the most important things we can do to survive; getting that message to legislators who hold the key to our economic future is how we do it.
Original article published on hbr.org