Small businesses comprised 99.9% of the total businesses in the USA, thus employing 47.3% American private workforce. These small businesses were severely hit due to COVID-19 restrictions in America. Almost 34% of small businesses have been closed as compared to that of January 2020.
On the onset of the Coronavirus outbreak in US in February 2020, a countrywide lockdown was imposed. Stores, factories, industries, and manufacturing units were closed around the globe due to policy mandates. Reduction in demand, health concerns, and many other factors were also playing their role in this extensive lockdown.
The impacts of this lockdown were severe on small businesses because their owners were not able to pay ongoing expenses to survive permanent shutdown. A lot of them were closed temporarily while a few were shut down completely due to lack of funds and loss of customers.
Different surveys were conducted to check the impacts of these restrictions on businesses at multiple scales. Many popular sources of data release their finding every month or every year corresponding to the period that they describe. To provide an account of impacts of COVID on small businesses, the brief primarily relies on employment data.
The very first estimates of these impacts were formulated by the CPS data that are used by the Bureau of Labor Statistics to track unemployment records. It found out that the number of working business owners reduced from 15 Million in February 2020 to 11.7 Million in April 2020. The loss of 3.3 Million or 22% of active business owners was the sharpest drop in the whole record.
It also extracted the results in which it was explained that how total working hours of all active business owners dropped by 29%. But incorporated businesses that are more growth-oriented and stable faced a drop of 20% from February 2020 to April 2020.
There was also a sharp distinction between the impacts across different genders, races, and immigrant statuses. It showed that African-American faced the greatest loss by a decline of 41% in active business owners. Similarly Latin experienced a great loss of 32% in active business owners when their business activities were halted due to restrictions. In the same way, immigrant owners and female owners experienced a sharp decline in active business owners of 36% and 25% respectively.
Further surveys were conducted from May 2020 to June 2020 to find out if the small business were ready to reopen completely or partially and if they have survived the shocks of restrictions in the critical past 3 months.
It was found out that there was a partial rebound in May 2020 and a further rebound in June 2020 when some of the small businesses started opening up and continuing their operation.
In May 2020, 7% of inactive business owners bounced back in the game reducing the 22% decline to only 15% by the end of this month. Moreover, in June 2020, additional 5% of inactive business owners restarted their operation upbringing the declining chart till 8%.
However, distinction patterns across gender, race, and immigrant status lingered on still in May 2020 and June 2020. African-Americans still continued facing a sharp decline in active business owners, eliminating 26% active business owners in May 2020 and 19% loss in June 2020. Similar losses were faces by Latinos with 19% inactive business owners in May 2020 and 10% inactive business owners in June 2020. Immigrant owners suffered a loss of 25% business inactivity in May 2020 and 18% in June 2020.
The results of these surveys showed that in the initial days of pandemic, no business was saved from the harshness of restrictions and suffered losses. However, these losses were spread variously on demographic charts and also depended upon the type of business. But there was a gradual comeback for all the groups who managed to survive this COVID pandemic.
Since September 2020, most of the small businesses have started continuing their operation again and they are moving towards the road of recovery quickly with the help of better strategies and the US government CARES Act programs.
With the approval of the first vaccine in December 2020 in America, the end of pandemic was ahead. Today, almost 45% of the American population has received at least one dose of vaccine and most of the COVID restrictions have been upheld, the businesses are also starting their operations gradually. But this rollout is not the same for all businesses and at all scales.
For instance, the rollout of small businesses that offer professional and business services, that already faced relatively less decline as compared to the leisure and hospitality sector, is greater than that of others. But there is still a long way to go till they achieve their pre-COVID levels.
The federal government has allocated $525 Billion for emergency funds. These funds are being distributed through various relief programs by the treasury department.
Despite of facing the excessive hardships of COVID, a lot of Americans are still starting up new small businesses. A record of EIN business applications has shown that there has been seen a dramatic increase in the applications for Employer Identification Number or EIN that is a good proxy for business formation activity.
These records show that even after being hit by one of the greatest pandemics of history, the unwavering yet innovative spirit of American is still giving hope to many. It also depicts the better days to come for the recovery of small businesses.
The pandemic has completely changed the insight of all the businesses. It has changed their pattern of consumption and forced all these businesses and upcoming startups to look for innovative ideas and better strategic plans to serve their customers and build their trust.
A lot of businesses died in COVID due to a lack of strategic plans to combat emergency conditions while some of them have made the best out pandemic by altering their business strategies timely and manipulating the hard times in their favor. Those who have survived this pandemic have learned some great lessons that will keep them going for a longer period.