Wednesday May 20, 2020 |Notes

PPP will not save most small businesses

Small businesses are being disproportionately hurt in the economic fallout from the covid-19 pandemic. A survey from the US Census Bureau has reported that only about half of businesses that applied for the Payroll Protection Program have received funding. The program runs out in 8 weeks and most businesses will not return to pre-pandemic levels of business.

The same Census Bureau survey found that only 2.5% of responding businesses reported a positive effect on business. And as noted by Small Business Labs, many industries are reporting negative effects:

The industries with the highest percentages of businesses reporting a large negative effect are:

  • Accommodation and food services - 83%
  • Arts, entertainment and recreation - 75%
  • Educational services - 74%
  • Healthcare and social assistance - 70%
  • Retail trade - 53%
  • Transportation and warehousing - 52%

Few small businesses have extra cash to weather even a few months of a downturn. Many businesses are nearing the end of the 8 week loan and will not be able to sustain the same costs moving forward - unless new revenue is generated. It's highly unlikely the old model will continue to work - especially if the numbers were somewhat tight before.

Many business will be forced to make layoffs, reduce space, move locations, and make other moves to reduce costs. The other side of this is generating more revenue. Most of these changes were coming in the next few years anyway, and it's not being compressed into a much shorter period.

Regardless, the organizations that thrive will not be those that simply use PPP to return to the old way of doing business. The digital economy doesn't need a millions of copies of each business. Successful businesses will evolve by investing in the digital economy to broaden their reach.

The coming months will be painful for many businesses and individuals. An 8 week loan program, regardless of the repayment needs, will not bridge a gap to the other side because it isn't there. It's time for small businesses to evolve.

about | contact
twitter github upwork linkedin
© Copyright 2021 All rights reserved.