It should come as no surprise that consumer confidence has suffered since cities, states and countries ramped up shelter-in-place orders this month. Unemployment is high, and people aren’t spending copious amounts of money, pushing countless small businesses on the brink of closing for good.
March’s consumer confidence index from The Conference Board dropped 12.6 points since February. Politico identifies this as the lowest consumer confidence has been since June of 2017.
Small businesses are experiencing a unique challenge during this crisis. Compared to major corporates, small businesses generally have less liquidity available to use in times of need. According to a study by the JPMorgan Chase Institute, on average, Main Street small businesses in the United States have enough cash reserves to cover less than a month of inactivity.
“Most businesses are going to zero revenue, and most businesses can’t survive long without any cash flow," WalletHub CEO Odysseas Papadimitriou said in a statement. "Like most consumers, most businesses have too little saved and too much debt to hunker down and ride out this type of shock to the system without outside intervention.”
While Congress’s $2 trillion relief package offers support to small businesses to the tune of $377 billion, sources say that amount won’t cover months of nearly zero revenue.
A study by Bloomberg and the analytics firm Dun & Bradstreet calculated that it would take four times that amount to replace the revenue most businesses with 500 employees or less would have made in three months.
In some cases, customers have deployed themselves to fill the revenue gap. When Powell’s Books in Portland — the self-proclaimed world’s largest independent bookstore — announced it would have to lay off the “vast majority” of its employees, loyal customers stepped up. An update from owner and CEO Emily Powell thanked customers for buying enough books online for the store to fully rehire 100 workers with benefits.
While individuals may step up for some businesses, others will likely have to rely partly on generous grants to persist. Applying to government agencies is one option. Many state and city governments area also establishing emergency funds for small businesses. And other opportunities are popping up as larger businesses launch coronavirus-specific grants to assist their smaller counterparts:
Google is giving $800 million in support of small- and medium-sized businesses, in the form of ad credits and an investment fund.
Facebook is creating a $100 million grant program that will go to 30,000 businesses around the world.
Amazon has set aside $5 million for a “Neighborhood Small Business Relief Fund” for those in the Seattle area.
Texas Woman’s University has established a $1 million grant program for woman-owned businesses, allocating $10,000 each.
Hello Alice, a machine-learning platform for female entrepreneurs, is offering $10,000 grants.
The CDFA/Vogue Fashion Fund has rebranded as A Common Thread as it retools to provide emergency funding for American fashion designers who have been affected by this pandemic.
SheaMoisture announced a $1 million relief fund in a bid to help support small business owners of color and women entrepreneurs.
If retaining the vitality of Main Streets across the country isn’t reason enough to support the likes of local cafes, family restaurants and gift shops, there is also the massive economic impact.
According to the U.S. Chamber of Commerce, only a tenth of a percent of U.S. businesses are not small. Half of the American population is employed by small businesses, and those shops, stores and boutiques create seven of every 10 new job opportunities across the country.
Grants are likely to be only part of the picture for small business survival. The Harvard Business Review (HBR) outlines three factors essential for small businesses to make it through this crisis. Liquidity is an important element, but the HBR also points to relief for capital and engagement with policymakers as essential.
The need now is to get available money, however big or small, to businesses. Alignable’s Small Business Pulse Poll shows that 80 percent of small businesses were already negatively affected by virus-related inactivity by March 17, jumping 20 percent in just four days. Today, speed is of the essence.
Image credit: Tim Mossholder/Unsplash
Roya Sabri is a writer and graphic designer based in Illinois. She writes about the circular economy, advancements in CSR, the environment and equity. As a freelancer, she has worked on communications for nonprofits and multinational organizations. Find her on LinkedIn.