Small Businesses Face Dire Scenario in COVID-19 Shutdown

Nancy Cleeland By Nancy Cleeland May 6, 2020

​Small-business owners have been struggling mightily through the COVID-19 pandemic, especially those in service industries and with fewer than 100 employees, and many don't think federal and state governments are doing enough to help, according to a new survey by the Society for Human Resource Management (SHRM).

About 60 percent of business owners surveyed said they've lost revenue as a result of the coronavirus and related stay-at-home orders. For 13 percent of them, the revenue loss has been total. More than half have laid off some employees; 14 percent laid off all of them. About 4 in 10 small businesses have had to close their physical operations.

About 60 percent of business owners surveyed said they've lost revenue

If the COVID-19 crisis continues, 12 percent said their businesses could not last another month and 52 percent said they would fold within six months.

"SHRM has tracked COVID-19's impact on work, workers and workplaces for months," said SHRM President and CEO, Johnny C. Taylor, Jr., SHRM-SCP, "but these might be the most alarming findings to date. Small business is truly the backbone of our economy. So, when half say they're worried about being wiped out, let's remember: We're talking about roughly 14 million businesses."

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Coronavirus and COVID-19

Mixed Grades on Government Response

The survey of 375 business owners was conducted from April 21 to 27. The businesses surveyed had up to 500 employees, but most employed fewer than 100. Nearly half of those surveyed were considered essential businesses and so were exempted from closure orders.

Full survey results can be found here. Among the highlights:

  • 54 percent of businesses laid off employees, while 22 percent furloughed employees.
  • 40 percent reduced employee hours, and 14 percent lowered employee wages.
  • 62 percent reported a general decrease in revenue, while 12 percent reported a general increase.
  • 46 percent said the federal government is doing enough to support small businesses; 36 percent disagreed.
  • 49 percent said their state government is doing enough to support small businesses; 31 percent disagreed.

Despite overwhelming interest and hope for federal relief, the SHRM survey found that significant shares of business owners didn't know about or understand the programs that have been rolled out or didn't think they would be helpful. Smaller businesses, those with fewer than 100 employees, were far more downbeat about government assistance than larger firms. Only 32 percent of owners of smaller businesses believed the federal government was sufficiently helpful, and only slightly more—37 percent—were satisfied with state efforts.

[Members-only webinar: Coronavirus, the Next Chapter: How the Economy and Business Will Be Impacted]

Notably, less than half (47 percent) of small-business owners said they were familiar with the Families First Coronavirus Response Act (FFCRA), which requires some employers to provide paid leave for employees affected by COVID-19. Of those businesses familiar with the FFCRA, nearly two-thirds said they thought they would be exempt from its requirements.

In contrast, 68 percent were familiar with the Paycheck Protection Program (PPP), which provides emergency loans that can become grants if used to maintain payrolls. But a significant share of those who knew about the program decided against applying because there was "too much bureaucracy involved" or because it would take too long to receive the benefits. Only 1 in 4 said they didn't need the money.

Reasons businesses did not apply for a PPP loan

Without Help, a Grim Future for the Smallest Businesses

The SHRM survey results underscore the pandemic's toll on the smallest of businesses, which has been documented in numerous ways. On May 5 The Atlantic declared "The Small Business Die-Off Is Here," citing crashing credit card sales, confusion and failures around government assistance programs, and predicting a future of more franchisees and fewer mom-and-pop shops.

The National Federation of Independent Businesses (NFIB) sounded the alarm in March, noting that its quarterly Small Business Optimism Index had fallen 8.1 points, the largest monthly decline in the survey's history and a head-spinning change after years of expansion. About half of small employers at that time said they could survive for no more than two months under current business conditions. Since then, the NFIB has pushed for government relief and loudly protested when it was revealed that some of the first round of PPP loans went to large or publicly traded entities. A second round of funding has been made available, and the group is pushing for more of it to go to genuinely small businesses.

"This money would have kept the lights on and payroll current for tens of thousands of true small businesses and their employees, and the news that it didn't is outrageous," said NFIB President Brad Close. "Small businesses are suffering through an economic shutdown in which they had no say, and these funds are crucial to their survival."

Still, a Culture of Resiliency

Despite the challenges, the survey also uncovered a thread of optimism. Nearly 7 in 10 owners expected their businesses to be back to normal within six months of the pandemic's end, and about the same number plan to bring all employees back when it happens. "It speaks to the resiliency of the small business community," said Trent Burner, vice president of research at SHRM. "They are willing to ride the pandemic out, and, although it may take more than six months post-pandemic, they are optimistic."



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