Small Businesses Prepare for Extended Downturn
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What broad challenges are small businesses facing as government aid runs out?
Here's your money briefing for Thursday, July 23rd. I'm J.R. Whalen for The Wall Street Journal. The coronavirus pandemic and the ensuing government lockdown orders devastated many small businesses. A lot of them got help from federal programs like the Paycheck Protection Program, letting them open their doors and rehire workers. But as those funds start running out, many business owners are bracing for a longer, deeper crisis.
Even the ones that have seen some recovery are nervous about how long-lasting that's going to be. And some businesses, even though things have improved, think it's going to take a long time for activity to get back to normal.
So what are the prospects for another rescue package from Congress? Our small business reporter Ruth Simon will explain after the break.
Small businesses around the country that were able to hire workers back and reopen are now faced with the possibility of having to let employees go and close their doors again.
Why are small businesses being forced to lay off workers again after reopening?
Our small business reporter Ruth Simon is here with details. So Ruth, why are small businesses having to lay off workers again?
Small businesses are facing two different challenges. One is there's a resurgence in cases in some parts of the country, and that's leading to more social distancing and additional pressures. And also small businesses, many of them are starting to run through the government aid they received from the Federal Paycheck Protection Program. And the big problem is There was this thought we would have a V-shaped recovery, but it looks like that's not happening.
How has the rise in coronavirus cases around the country forced owners to reshape their businesses?
It's definitely one of the issues for some of the businesses. There's also even in places where we're not seeing a rise. there's a fear that cases may rise. And you have to keep in mind that small businesses, they operate with thinner cash reserves and thinner margins than bigger companies, and their businesses are less diversified, so they're more vulnerable to begin with.
Now, you mentioned a fear factor about the coronavirus cases among business owners.
How are rising coronavirus cases and customer fear reshaping small business operations?
Is there also a fear factor among their customers?
That depends where you are. We've seen cases where people just want to go back out, but we also have lots of people who are still staying home or being very cautious. And one of the big questions is, are we going to see fundamental changes of behavior? And even if we don't see fundamental changes in behavior, how long is it going to be till we return to something that feels more normal?
Now, in talking with small business owners, what have they said about the Paycheck Protection Program?
For the ones who got funds early, one of the issues was the initial limitations where you had eight weeks to spend the money and a certain amount had to be spent on payroll. It's a little more flexible now, but many of the first recipients have run through their aid. I think they need more assistance. They would like to see that assistance targeted to the sectors and the companies that need aid most.
And what does the data regarding hourly workers tell us about how small businesses have fared?
Now, a lot of the hourly worker data we've been looking at comes from main street sectors that involve a lot of human face-to-face contact. So you can think about things like restaurants or gyms or retailers or hair salons. And what we saw is that hourly workers, that fell back quite a lot. It was starting to, the number of employees was starting to recover. after reaching a low in early April, and it was starting to move back up.
What limitations of the Paycheck Protection Program have impacted small business survival?
But in recent weeks, we've seen things start to soften again. There was a pullback in late June that continued into mid-July.
Wow, the pandemic has really been a struggle for small businesses, but many were close to getting back on their feet.
And I think that's one of the things that's very hard. And even the ones that have seen some recovery are nervous about how long lasting that's going to be. And some businesses, even though things have improved, think it's going to take a long time for activity to get back to normal.
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Chapters
6 chapters
1
What broad challenges are small businesses facing as government aid runs out?
0:05–1:07
2
Why are small businesses being forced to lay off workers again after reopening?
1:07–2:25
3
How are rising coronavirus cases and customer fear reshaping small business operations?
2:25–4:01
4
What limitations of the Paycheck Protection Program have impacted small business survival?
4:01–6:00
5
Which sectors and hourly workers have been hit hardest and why are recoveries softening?
6:00–6:40
6
What aid is Congress discussing and how urgent is targeted help for struggling small businesses?
6:40–7:03
Speakers
2 identifiedMore from WSJ Your Money Briefing
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