There are 31.7 million small businesses in the U.S., according to the U.S. Small Business Administration. Yet, they are arguably struggling the most to stay afloat this year.
Since the onset of the COVID-19 pandemic, small businesses have felt the burden as store after store has closed their doors. As the virus progresses with little control over it, small businesses are running out of funds and even with federal aid, many shops may still have to shut down forever if a better solution doesn’t come soon.
A total of 97,966 U.S. businesses have permanently closed as of Aug. 31, and the number continues to climb. With the country averaging 85,000 new coronavirus cases each day for about the past week and a half, according to The COVID Tracking Project, lockdowns and restrictions are unpredictable. For some business owners, trying to survive in these current economic conditions is almost impossible.
These struggling mom-and-pop shops have often been overlooked, even before the pandemic. Sometimes people find it more convenient to head to their local grocery stores and supermarket chains, like Target, for their necessities. At times, they find it easier to grab dinner from a fast-food chain than drive farther to a small family-owned restaurant.
As a result of the pandemic’s economic instabilities, the U.S. Small Business Administration implemented the Paycheck Protection Program. As part of the Coronavirus Aid, Relief and Economic Security Act, the administration distributed $659 billion in loans to small business owners with enough funds to cover up to eight weeks of payroll costs. Approximately 5.2 million businesses were approved and received loans.
The Paycheck Protection Program was implemented with good intentions, in hopes of getting people off of unemployment and securely back to work. Despite this, it has done little to alleviate the problems these store owners face. Ultimately, more needs to be done to help keep small businesses up and running.
The program, which expired Aug. 8, has actually caused quite a stir since it came into play.
Many large and thriving companies applied, and even qualified, to receive loans through the program. Restaurant chains like T.G.I. Friday’s and Five Guys received loans of roughly $5 million to $10 million each. Since these types of companies operate under the franchise model, each location with less than 500 employees qualified for million dollar loans.
Despite their loan qualifications, these flourishing companies receiving the program’s loans including Yeezy, Shake Shack and even the Los Angeles Lakers, are not at the same financial status as small family-owned businesses that barely even meet their margins.
Shake Shack and similar chains will likely survive with their hundreds of locations, but giving loans to these companies is unfair to small-independent owners whose livelihoods depend on their business.
Additionally, the loan’s forgiveness rules were another fault of the program. They stated that 75% of the money must go toward the company payroll. This left small business owners with hardly any remaining funds to spend on rent and other necessary supplies.
In an ideal plan, the loans would have instead allocated more money toward rent and utilities in order to allow businesses to stay open. If businesses cannot be open to the public, there is almost no point in spending so much on payroll costs when employees are hardly working or unable to work at all.
Many business owners have found themselves trying to strike deals with landlords and digging into personal savings in order to pay rent from month to month. Some landlords are generous, and some just aren’t, understandably. Some landlords still have property debts and operational costs they have to continue to pay for, while others rely on the cash flow from the property as a primary source of income.
A possible solution that could more effectively minimize the number of small businesses permanently closing while the nation tries to get a grip on this virus is a rent protection program.
Similar to the Paycheck Protection Program, the administration should consider approving loans for small businesses where instead of 75% of the loan going toward payroll costs, that money would be required to cover rent and utilities. This leaves the remaining 25% for payroll costs and any extra benefits employees may receive with their job.
It could take a lot of weight off of business owners if they were ensured at least six months of rent. This may also further protect landlords from financially falling apart .
Of course, paying employees is important, but the main goal of federal assistance from the beginning should have been to keep small businesses afloat, seeing as how they contribute so much to the nation’s economy.
Loyal customers can only support their local and small businesses so much. It is up to the government to modify and execute a better plan that would save not only livelihoods, but also the economy.