Commentary

April 7th, 2020

Small-Business Sector is Most Likely to Collapse Amidst COVID-19 Crisis

As per a recent report by the Federal Reserve Bank of New York, even the best-managed small businesses are in a vulnerable position due to the COVID-19 economic crisis.

The report titled “Small Business Credit Survey: 2020 Report on Employer Firms,” examined US based small businesses consisting with less than 500 full or part time employees. According to the report, 20% if businesses that classified “healthy” only had enough money and assets saved up to operate for around 2 months. Furthermore, 10% of businesses that classified as “less than financially secured” could survive for 2 months.

The report marked that in case that small businesses were asked to cut back, healthy firms would survive by cutting back staff and pay. On the other hand, the troubled firms would be more likely to borrow in order to stay in business. Further, the report affirmed that while borrowing is easily accessible to large companies, it is not that readily available for most of the modest size firms.

The bank reveled that many firms were already struggling prior to the coronavirus crisis. In fact nearly two-thirds of those respondents faced complications over the last year.

This report proved to be very insightful and provided the government with further understanding on how to aid these small businesses during this current economic crisis. With information, the Federal Reserve revealed they would be creating a new program to finance loans through the government’s emergency small-business lending program.

AIS will keep monitoring the dynamic economic projections and provide insights about the impact of COVID-19  on the business and consumer bankruptcies and all the other default services.