Ongoing Impact: The Long-Term Effects of COVID-19 on Small Businesses

Small and midsize businesses (SMBs) account for 99 percent of companies operating in the United States. But as noted by McKinsey, these same businesses are often the most vulnerable to large-scale disruptions: The research firm found that in the age of COVID-19, thirty million small businesses' jobs are vulnerable. According to the Washington Post, meanwhile,100,000 SMBs have now closed their doors — permanently.

But what happens when pandemic pressures ebb and the nation enters its "new normal"? What are the long-term effects of COVID-19 changes and closures, and how do SMBs bounce back?

How has COVID-19 affected small businesses?

As noted by a recent PNAS paper, 43 percent of small businesses temporarily closed their doors just weeks after the pandemic arrived in force. Expectations around positive outcomes depended largely on the length of the crisis itself — while 72 percent of respondents believed their business would survive through December 2020 if the worst part of the pandemic lasted only one month, just 47 said the same for a crisis lasting four months or more. 

Market verticals also impact business operations; recent data found that SMBs in the hospitality, education, oil and gas and entertainment sectors were the most likely to report "large negative effects" caused by the current crisis.

What are the long-term effects?

While the immediate impacts of COVID-19 — the closure of non-essential businesses, reduced foot traffic and supply chain disruptions, to name a few — can cause significant up-front issues for SMBs, there's a larger concern for many companies: Long-term effects.

As noted by Business Insider, one potential problem is "startup depression" — a lack of new businesses entering the market thanks to pandemic pressures — which could negatively impact SMBs over time. While the notion of limited competition is appealing at first glance, slow startup scenarios could also result in reduced access to critical business components, such as on-demand inventory supply or building maintenance, as SMB numbers across all industries fall.

Consumer confidence is also a concern. According to PYMNTS.com, "consumers have largely rewritten their routines and shopping habits to adapt to the Coronavirus crisis" as in-person shopping options vanished. And while eCommerce has enjoyed an uptick, increasing digital purchase volumes aren't enough to offset the loss of foot traffic for brick-and-mortar stores. Instead, customers would prefer a "return to normal" — something almost half of those surveyed said won't happen until there's a viable treatment or vaccine for COVID-19.

For businesses, this individual uncertainty leads to a double detrimental effect on both sales and staff. Even as the worst part of the pandemic begins to pass consumers remain reticent to shop in retail stores, while employees worried about their own health and safety may be reluctant to return to work. As a result, SMBs looking to ramp up operations may find themselves facing a long road back.

Tips to bounce back post-pandemic

Despite a somewhat dour outlook, there's still hope for SMBs: The right approach to reopening, combined with assistance from agencies such as the Small Business Association (SBA) or current banking partners can help small businesses survive — and thrive — in the new normal. 

While post-COVID success stories will vary across markets and industries, some generally-applicable advice can help jumpstart reopenings:

• Prioritize safe processes — Safety is the watchword for successful reopening. This includes extra cleaning and sanitizing of high-touch surfaces but also requires effectively communicating these new processes to consumers through emails, online posts and in-store bulletins.
• Consider government programs — While the SBA's Paycheck Protection Program (PPP) recently ended, SMBs have other options[cite::219::cite] through CB&T. As of August 15th, 2020 the SBA has approved more than 3.4 million EIDL loans worth over $184 billion.
• Understand state mandates — Every state has different requirements for reopening. For example, Washington state has specific guidelines for businesses such as fitness and training facilities including the placement of equipment, the use of masks and the total number of patrons. Failure to follow state guidelines could result in business fines or re-closure.
• Ask for help — The right financial partner can help small businesses streamline the process of SBA financing or help SMBs with loan assistance to help cover immediate costs and drive long-term success.
• Pivot existing business models — From expanding physical operations to account for social distancing to improving online purchasing models or offering curbside pickup options, pivoting current business models can both help SMBs survive at the moment and create new revenue streams that drive increased sales over time as consumer habits are reshaped by evolving pandemic priorities.

The bottom line

While COVID-19 has wreaked havoc on consumers and companies alike, prolonged pandemic problems are most worrisome for small businesses that may lack the on-hand capital to survive reopening repercussions. But it's not all bad news — by prioritizing safety, pivoting current business models and partnering with supportive financial providers, it's possible for SMBs to both weather the storm and see long-term success. [cite::171::cite] [cite::172::cite]