Small Businesses Put Off Investments, Lay Off Workers

Empty Restaurant

More than two-thirds of U.S. small businesses have felt the coronavirus’s impact on sales, and  nearly as many expect their sales will continue to drop.

Specifically, 69 percent of small companies report a large decline in demand because of the COVID-19 pandemic, according to a survey by the software provider Thriv and America’s Small Business Development Centers. Sixty percent expect demand to continue falling.

#CODIV-19 is forcing SMBs to cut back on new investments, as well as lay off workers. #HR #HRTech #HRTribe Click To Tweet

The study indicated 60 percent of respondents have delayed or cancelled plans for new investments, loans and expansions in light of the pandemic. Not surprisingly, most small businesses—64 percent—have cut employee hours, while 22 percent said they expect to do so.

“They are seeing demand plummet and are unable to stock their shelves due to supply chain disruptions,” said Thryv Chief Strategy Officer Gordon Henry. “As a result, they are having to cut employee hours to stay operable.” Seventy-four percent of small companies said they or their suppliers have seen disruptions in their supply chain.

Small Businesses Reel

The economy showed its first real signs of struggle because of the virus about 10 days ago, when layoffs began across the country. Unemployment claims rose to 281,000, an increase of 70,000 from the previous week. It was the highest number of initial claims since Sept. 2, 2017, according to the Department of Labor. Some economists have speculated that more than 1 million workers could lose their jobs by the end of March.

While layoffs at restaurants, retail outlets and entertainment venues have been widely reported, law firms, marketing firms, insurance companies and other small businesses are letting workers go, as well. “What’s happening is uncertainty is causing everybody to buckle down and stop spending money,” Jessica Fialkovich, an executive with small-business broker Transworld Business Advisors, told USAToday. “It’s really bad.”

While the proposed U.S. stimulus package contains funds for small-business relief, many business owners and trade associations worry the dollars allocated won’t  be enough, and won’t arrive in time to save the many SMBs that don’t have a cash cushion. “I cringe when I hear three months,” said one. “That makes me incredibly nervous because we don’t have the revenues, the rainy-day funds, to see us through three months.”

The Small Business Administration is offering a number of informational and loan resources. They can be found here.

Is the coronavirus impacting your company’s business? Send us an email and let us know. 

Sign up for our newsletter here.

Image: iStock