Small businesses are struggling economically in light of the COVID-19 pandemic. Many businesses have closed as a result of shelter-in-place orders, and even in states less severely affected by the virus, many non-essential businesses have closed. Further, companies that have remained open are dealing with the fallout stemming from the public’s fear of the spread of the disease. Due to the volatility of the stock market, home builders and others in the construction industry may experience a slowdown in customers seeking to build new homes or renovate as a result of their shrinking investment accounts. Likewise, many other industries are suffering from curtailed discretionary spending and decreased consumer confidence. Employees have also been affected, with businesses forced into schedule reductions, pay cuts and layoffs due to virus-related slowdowns, as well as mandatory or voluntary closures.
As the number of cases of COVID-19 in the United States has risen sharply in recent days, the government has begun considering a number of responses aimed at lessening the economic impact. In a surprise move on March 15th, the Federal Reserve decreased the federal interest rate from 1-1.25% to 0-0.25%. The federal government and many state and local governments have also granted small businesses and individuals extensions on tax return filings and payments.
Congress passed the Families First Coronavirus Response Act, signed by President Trump on March 18, to require companies with less than 500 employees to provide paid leave for workers who are sick or quarantined and those who are unable to work because of the need to care for children arising from COVID-19-related school closures or lack of childcare in a temporary expansion of the Family and Medical Leave Act. The new legislation also provides small and medium-sized companies with tax credits designed to immediately and fully reimburse them for the cost of providing COVID-19-related leave to their employees. Eligible employers who pay sick or child care leave pursuant to the new legislation will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid. Further, employers will be able to file a request for an accelerated payment from the IRS if there are insufficient payroll taxes to cover the cost of the leave. Self-employed individuals will receive an equivalent credit.
A massive stimulus package requested by President Trump, if passed by Congress, will pump $2 trillion into the economy. In an effort to provide relief to individuals, the package provides Americans who make up to $75,000 a check for $1200 and $2400 for married couples making up to $150,000, with an additional $500 per child. In addition, it includes tax rebates, tax relief provisions for businesses, four months of unemployment benefits, a corporate liquidity program, and an expanded small business loan program.
What Steps Can Small Businesses Take to Mitigate the Impact?
Small businesses can take steps to enable them to remain viable even if the virus continues to spread throughout the U.S.:
Businesses that have remained open should consider allowing their employees to work at home whenever possible, and when it is not possible, situating workspaces to allow more distance between them and implementing other safety precautions, such as coaching employees about hand washing, frequently cleaning hard surfaces, and other measures aimed at preventing the spread of illness.
Small businesses should try to cultivate alternate supply chains, especially if they have been using suppliers from areas more widely impacted by the virus.
Taking steps to lower their overhead costs and protect their cash flow may help small businesses withstand COVID-19-related reductions in sales and customers until the danger passes.
Small businesses may be able to file claims under insurance policies covering business interruptions or closures if they suffer COVID-19-related losses, depending upon the language of the policy. If small businesses do not yet have this type of coverage, now is a good time to consider obtaining it in case another crisis occurs in the future.
Even in a crisis situation, there may be positives. For instance, there may be more opportunities for small businesses to access funds at lower rates, which may be important if loans are needed to help them stay open until the impact of COVID-19 decreases. In addition, while larger businesses more dependent on global trade may experience significant disruption, small businesses less sensitive to international economics may be able to continue offering products and services even during the crisis.
This Too Shall Pass
The threats represented by COVID-19 will eventually lessen, so the goal for small businesses should be to remain proactive and tighten their belts until things return to normalcy. As the well-known British motivational slogan states: Keep calm and carry on. And call us if we can be of assistance with your business.