Just as the nation’s more than 30 million small business owners were getting back on their feet, Main Street is again seeing its survival threatened by Covid-19.
According to a new analysis of U.S. Census data by the Economic Innovation Group, businesses are increasingly reducing employees’ hours, reporting declining revenues and, in some sectors, laying off more workers than they’re hiring. John Lettieri, president and CEO of the Economic Innovation Group, says this suggests a relationship between vaccination rates and economic health.
“The latest findings underscore the need to dramatically improve vaccination rates and the availability of rapid testing,” he says. “Small businesses are going to continue to struggle until the public health crisis is under control—it’s that simple.”
Following the first wave of the pandemic—which resulted in an unemployment rate of 14.8%, the highest since the Great Depression—the U.S. saw applications to start new businesses grow by 41%, according to the Census Bureau, a rate far outpacing the usual post-recession uptick. This trend is reflected in our third installment of the Next 1000: a Forbes list of U.S. entrepreneurs with less than $10 million in revenue or funding. (You can see the spring and summer classes of 250 each here.) Some 15% of applicants launched their businesses amid the pandemic. But the optimism that fueled that surge may be fading.
“There’s some good news and bad news,” says Sheryl Sandberg, chief operating officer of Facebook and a Forbes Next 1000 judge. “The good news is that fewer small businesses remained closed at 18%, down from 24% in February. But the bad news is that women and people of color-led small businesses remain the hardest hit.”
According to Facebook’s recently released Global State of Small Business Report, 20% of women-led small businesses have remained closed since February, as compared to 16% of those led by men. The report also finds that small businesses led by those from underrepresented groups were at least 50% more likely to be closed or to have lower sales as compared to this time last year.
Despite these challenges, Philip Gaskin, the Kauffman Foundation’s vice president of Entrepreneurship and a Forbes Next 1000 judge, says the pandemic has created opportunities for founders—especially those of color and women. “It is these resilient entrepreneurs who are best suited to create the companies to solve these challenges,” he says. Of the Next 1000 semi-finalists, 60% identify as a person of color and 56% as female.
To forge ahead, small business owners unsurprisingly say they’ll need financial aid. Private sector programs, like Facebook’s recently launched Invoice Fast Track—through which the social network will fund up to $100 million in outstanding invoices for diverse small business owners in the U.S. in exchange for a low, fixed fee—have a role to play. But the overwhelming majority (88%) of respondents to a recent Goldman Sachs survey of participants in its 10,000 Small Businesses program want the federal government to provide additional financial assistance in light of the rise in Covid-19 cases. Meanwhile, 91% support the creation of a long-term, low-interest loan guarantee program to help small businesses rebuild their balance sheets.
“Despite the historic success of the Paycheck Protection Program and other SBA loan programs, access to capital remains one of the most pressing issues facing small business owners around the country,” says Joe Wall, national director of Goldman Sachs 10,000 Small Businesses Voices. “Congress and the Administration must act soon before thousands of small businesses confront a liquidity crunch. With winter approaching and rising Delta variant infections, aggressive policy actions are needed to stave off another downturn for small businesses.”
Until then, entrepreneurs will need to remain resilient, continuing to pivot their business models as nearly all (95%) have done amid the pandemic, per Goldman Sachs, and embrace the digitalization that has helped them adapt.
“The silver lining of Covid was that there was a digital transformation underway,” says Sandberg. “It was there before but the pandemic massively accelerated it, and a lot of businesses have bigger earning potential and more opportunities to hire people and serve their local communities than ever before.”
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