The United States faces a wave of small-business failures this fall if the federal government does not provide a new round of financial assistance — a prospect that economists warn would prolong the recession, slow the recovery and perhaps reshape the American business landscape.
As the pandemic drags on, it is threatening even well-established businesses that were financially healthy before the crisis. If they shut down or are severely weakened, it could accelerate corporate consolidation and the dominance of the biggest companies.
Tens of thousands of restaurants, bars, retailers and other small businesses have already closed. But many more have survived, buoyed in part by billions of dollars in government assistance to both businesses and their customers.
The Paycheck Protection Program provided hundreds of billions in loans and grants to help businesses retain employees and meet other obligations. Now that aid is largely gone, even as the recovery that took hold in the spring is losing momentum. The fall will bring new challenges.
As a result, many businesses face a stark choice: Do they try to hold on through a winter that could bring new shutdowns and restrictions, or do they cut their losses while they have something to salvage?
For the Cheers Replica bar in Faneuil Hall in Boston, the answer was to throw in the towel after nearly two decades in business.
“We just came to the conclusion, if we’re losing that much money in the summertime, what’s the winter going to look like?” said Markus Ripperger, chief executive of Hampshire House, the bar’s parent company.
Cheers was a long-standing, successful business with access to capital and owners willing to invest to keep it going. But the bar, built to resemble the one on the 1980s sitcom, depended heavily on tourist traffic that collapsed during the pandemic.
Small businesses have grown more pessimistic as the pandemic has dragged on. In late April, about a third of small businesses surveyed by the Census Bureau said they expected it to take more than six months for business to return to normal. Four months later, nearly half say so.
The ultimate damage could be much greater. In a recent survey by the National Federation of Independent Businesses, a small-business lobbying group, 21% of small businesses said they would have to close if conditions did not improve in the next six months. Other private-sector surveys have found similar results.
Maurice Brewster is hanging on. He runs Mosaic Global Transportation, a California company that was growing quickly before the pandemic running the private buses that shuttled tech workers between their San Francisco homes and their suburban office campuses.
Those campuses have been all but empty since March, and many companies aren’t planning to bring workers back until next year. Other parts of Brewster’s business — providing transportation for conventions, wine tours and other events — are also suffering.
To survive, Brewster, who is Black, has slashed costs and sought new lines of business, including delivering packages for Amazon — “anything to get the vehicles moving and get some revenue coming in the door,” he said.
Economists said there is time to limit the damage. Despite a rocky start, the Paycheck Protection Program eventually paid out more than half a trillion dollars in loans and probably saved many businesses from failure, according to research from economists at the University of Illinois and Harvard. But the program lapsed in August, and if Congress doesn’t move soon to replace it, the earlier effort could end up delaying failures rather than preventing them.
Many experts still expect Democratic and Republican leaders to reach a deal on an aid package that includes support for small businesses, but a new, large-scale program seems increasingly unlikely.