Three in ten US small businesses say they won’t survive in 2021 without government support., A survey from the Federal Reserve Bank shows. Given that there are about 30 million SMEs in the United States, this means that 9 million SMEs are at risk of being completely shut down.
The outlook for minority-owned companies is even worse. According to a Fed survey, eight in ten say the company is in poor financial condition, even after receiving limited support from Paycheck Protection Program (PPP) loans and other small business bailouts. Pandemic.
Sam Myers, operations manager for Dillard Movers, a black-owned moving company in St. Paul, Minnesota, described 2020 as a difficult year for business and said 2021 was shaped in the same way.
“We were on the verge of cave exploration and going out to find a full-time job,” Myers said, referring to herself and her co-owner James Dillard.
According to Myers, the Dillard Mover’s struggle began in March last year, and the pandemic was as furious as the movers’ busy season began. Orders began to pick up again in June, but “three months have been a long time without income and the bill continued to enter,” Myers said.
Myers, 37, said the company managed to stay on the surface through a family loan and the use of her personal credit card. “I created a little Instacart in case I needed additional money,” she said. “As a small business, we didn’t have much cushion.”
In all ethnic groups, small business owners like Myers have taken extreme steps to keep the door open for most of 2020, according to Federal Reserve researchers. According to Fed surveys conducted in September and October last year, the proportion of SMEs with debt above $ 100,000 in 2020 increased from 13% in 2019 to 44%. This percentage did not include PPP loans. Said.
“The debt of small businesses has increased, and business owners have poured their personal savings into the company to bring them to the fore,” the researchers said.
Nationwide sales decline
Rob Fairy, an economist at the University of California, Santa Cruz, said in a testimony to the House of Representatives Small Business Committee last Thursday that small business sales fell 6% nationwide from October to December. According to Farley, minority-owned businesses have lost 10% in sales and are black and Hispanic family owners who usually do not have access to the levels of wealth and credit needed to stay in business in the economy. For me, this number was particularly annoying. recession.
“Before the pandemic, both groups’ business ownership and profits were already low,” Fairy told lawmakers. “But perhaps more importantly, there is a huge wealth gap. Many minority business owners simply don’t have the financial resources to survive a long-term closure.”
Congressmen approved a two-round paycheck protection program in 2020, hoping to help small businesses through a pandemic.But many small business owners, especially minority-led companies, saidOf the first round of PPP.
Mortgage racial disparity
According to a survey by racial equality groups Color of Change and Unidos US last spring, only 12% of black and Hispanic business owners who applied for low interest rate loans allowed under the Federal Paycheck Protection Program initiative received them.Meanwhile, an early loophole in the programLike Ruth’s Chris Steak House, Shake Shack initially robbed tens of millions of dollars in federal financing.
Loan program data released in December and analyzed by the Associated Press show that many minority owners are anxious for bailout loans.One was near the end of PPP’s lifespan, but more white business owners were able to get loans early in the program.
The first round of the program, which began in April 2020 and ended in August, received 5.2 million loans worth a total of $ 525 billion. The money helped many companies at least stop, as local governments forced them to temporarily shut down or operate in a diminished capacity during a pandemic.
According to a Federal Reserve Board of Governors survey, PPP struggled to fulfill its promise to support communities that did not have historically needed support, but among small business owners in 2020. It was the most popular emergency funding lifeline. Of the 82% of companies with employees who applied for a PPP loan, 77% said they had received the full amount of money they requested, and that the money they received helped maintain staff salaries.
The Myers company got a $ 10,000 PPP loan, which she said was less than she requested.
“We applied for the loan again and it was only approved for $ 2,900,” Myers said. “I don’t know what math they use, but it seems unfair for these giants to get the money they need, and we even get what’s important. I could not do it.”
Congress approved the third round of a $ 284 billion PPP loan in December. Companies that have not previously received a loan have another opportunity to help, but those that have been hit hard by the outbreak of the virus are still eligible to apply for another loan. The Small and Medium Business Administration said last week that it had already distributed $ 35 billion of its third round of funding.
9 million U.S. SMEs fear they can’t stand a pandemic
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