How will small businesses survive the COVID-19 apocalypse?

Many small business owners in Nevada face either shutting down or relying on federal government programs to survive the governor’s order to close “nonessential businesses” until April 30th.

Nonessential businesses include entertainment and hospitality, strip clubs and brothels, casinos, concert venues, arenas, auditoriums, stadiums, large conference rooms, meeting halls, cafeterias, recreation facilities, beauty and personal care services, and retail facilities, including shopping malls, except for pharmacy or other health care facilities within retail operations. Retailers are encouraged to continue online services with pick-up and delivery. The Small Business Administration lists approximately 30 million small businesses spread across the United States. Collectively they employ almost 59 million people. By the end of June, up to half of them might be gone.

In a community like Pahrump, where residents are already underserved for goods and services compared to other similar-sized towns, some small businesses may have to close their doors permanently. Even during strong economies, local small businesses struggle to remain open because of the low per capita income levels of residents and the lack of a robust business infrastructure system in place.

Forced to close their doors because of the governor’s order, small business owners’ revenues dwindle to zero.

Still, rents, utilities, and other business expenses continue to add debt to the small business. According to a widely cited 2016 study by JP Morgan Chase, half of all small businesses have enough cash on hand to survive for only 27 days without new money coming in the door.

The bar and restaurant industry tends to be particularly vulnerable. The average small service bar and restaurant have enough cash on hand to survive just 19 days without any income. The cash crunch is magnified by the ever-changing dates that we might expect to start getting back to normal. Doctors and our elected officials have a fluid timetable on when the pandemic will slow down, and the 30-day closure order may be extended.

Large companies have resources to cover those expenses during a downturn. Major retail and restaurant chains build cash by taking advantage of efficiencies of scale to outperform their smaller competitors, giving them the reserves to survive a recession. They also have access to better lending options than a local operation, making it easier and cheaper to get cash to pay their bills during the quarantine.

Recognizing that small businesses closed by government mandates must survive, the federal government with Congress and the Senate, passed the federal stimulus bills enacted last month. The bipartisan $2 trillion economic relief plan, offers help for the millions of American small businesses affected by the coronavirus pandemic.

There are two main federal aid programs, which are being managed by the Small Business Administration. Business owners can get help from both at the same time, but there are some restrictions.

The paycheck protection program is a forgivable loan intended to pay for eight weeks of a business’ payroll costs, so the company can retain workers or hire back those it has already laid off. The government has also expanded the existing economic injury disaster loan program, which offers low-interest loans. A portion of those loans does not have to be repaid.

The SBA’s Economic Injury Disaster Loan provides vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing as a result of the COVID-19 pandemic. The application for this loan is processed directly through the SBA. The SBA loan process is off to a rocky start with the online application website overwhelmed with business owners trying to apply and has crashed frequently.

The second program in the small-business bailout is the “Paycheck Protection Program” administered through banks. The banks have been slow to roll out this program and placed restrictions on who can apply for the program through them.

Initially, the big banks like Bank of America, stated that only existing customers who have an account and a current loan relationship with them could apply. Under intense criticism, Bank of America, along with other major banks, has rolled back the loan requirement.

The small business bailout programs assume that once restrictions lift, customers will quickly return at pre-pandemic levels to businesses. That is an optimistic scenario. It also expects that the majority of the population will return to work immediately and have a spendable income—another optimistic scenario.

For local small businesses to survive, they must get an infusion of money quickly to pay their regular overhead expenses without bureaucratic delays.

If they survive through the shutdown and can reopen, they need an additional injection of cash to stay open until customer numbers return to pre-pandemic levels.

This community cannot afford to lose one local business. The president, Congress, and the Senate have vowed to add more money and additional help if and when needed. Let’s hope they do and that our small business owners stay in our community.

Tim Burke is a businessman, philanthropist, educator and Pahrump resident. Contact him at timstakenv@gmail.com