When the pandemic hit, no one was fully prepared, including small businesses. According to a statistic from Goldman Sachs, a survey was conducted where 50% of small business owners mentioned they couldn't operate after three months.
This 2020 survey highlighted the need for prompt policy action and solid support. Business owners are working hard to ensure their years of work don't vanish in a blink of an eye.
One of the major worries entrepreneurs faced during the pandemic was small business financing to keep their companies afloat. At a time when the government was focused on fighting the virus, not much attention was paid to the problems the economy was facing.
Smaller businesses were hit the hardest
The coronavirus pandemic ravaged the economy in 2020, and within two weeks when the federal relief program was launched, it went dry.
The erstwhile president of the United States, Donald Trump, signed a bill containing a $250 billion request to help small and medium-sized businesses. With this program, businesses were provided with forgivable loans to pay their workers and remain home while the pandemic ravaged.
In Chicago, small businesses were excluded from the dried-up federal paycheck protection program. With the economy gradually coming out of the woods, small businesses in Chicago and the rest of the United States are forced to comply with the tough realities about their earnings and their place in the nation's economy.
Currently, various programs are being formed, with some of them yet to be implemented. They are targeted at providing small business financing and other benefits to small businesses.
The first rounds of PPP didn't help small businesses
At the end of March 2020, the U.S. government introduced the forgivable loan program estimated at $669 billion. It was intended to provide a lifeline to small businesses affected by the pandemic.
They were mandated to use at least 75% of the loan to settle payroll costs and maintain the original headcount of employees. If these businesses could achieve this, the government planned to forgive their loan.
However, the PPP plan had its flaws. It was hinged on a calculation that was unnecessary for small businesses. This plan focused more on staff payment without considering other business costs like electricity, logistics, maintenance, etc.
Also, businesses that didn't fulfill the program dictates faced severe predicaments because they had to pay the loan depending on how they fared.
In addition, businesses that used this plan for expenses instead of payroll faced fraud charges as they were expected to use most of the funds to pay their employees.
Why small businesses still struggle in 2021
Financing is needed to help business owners get back on their feet because of the damage done by the pandemic. Without financial support, several companies will struggle to keep the 'open' sign-on. They will also find it challenging to manage increased demand. The absence of capital makes it harder to run other types of strategies like sales, marketing, or growth.
This only makes the gap between big companies and small businesses even wider.
On a final note
To curtail the devastating effects caused by the pandemic, small businesses need all the help they can get to survive. And this includes getting access to small business financing that will help them scale their business to greater heights.
If you are a business owner, be on the lookout for grants and flexible loans. Search for opportunities beyond the traditional methods, you can find institutions online that are focused on helping hardworking people with capital and guidance.