Main Street ‘Cash Chasm’ Too Deep For Many SMBs

It’s been two weeks since the Payroll Protection Program (PPP) began accepting applications for emergency aid, and as of April 16, the Small Business Administration’s (SBA) $349 billion coronavirus relief fund was already exhausted, while borrowers and lenders await word of further appropriations.

But despite tidbits of good news that infection rates are coming down and government money is moving out, a majority of Main Street businesses don’t see themselves surviving COVID-19.

“The average SMB reported only having enough cash to stay open for 37 days as of April 6,” according to the PYMNTS report Main Street On Lockdown: The COVID-19 Cash Chasm edition.

“They noted receiving government aid would give them enough to stay open for 97 [days], but they expected the pandemic to last an average of 150 days — leaving a wide chasm between the number of days they expected to survive and the number they needed to survive to weather the pandemic.”

This “COVID-19 cash gap” will be decisive in which small and medium-sized businesses (SMBs) remain in operation, and which don’t.

PYMNTS surveyed over 500 SMBs on March 24, and again on April 6, as entire populations waited out the coronavirus pandemic indoors, and stores sat empty. Digging into the data from Main Street On Lockdown: The COVID-19 Cash Chasm edition, fifth in our series of special reports chronicling the pandemic’s impact on business, what jumps out is how little monetary relief has alleviated worry or improved owners’ outlooks.

“The aid package may be the largest in U.S. history, but it has not made Main Street SMBs feel any more stable than they did before it was passed,” the report states. “The share of SMBs whose owners believe their firms would survive the pandemic remains largely unchanged since March 24, with just an additional 0.2 percent of SMBs feeling confident on April 6.”

Industries and verticals are reacting to the situation differently. Professional services SMBs saw their confidence rise between the March 24 and April 6 surveys, for example, with owners far more confident in their stability levels on April 6 than on March 24. Same for tech firms.

“Our research shows that 62.5 percent of professional services SMB owners reported feeling sure they would survive the pandemic on April 6, compared to 43.8 percent who said the same on March 24. Technology SMB owners also seem more confident now than they did on March 24,” with tech SMBs’ confidence rising more than 18 points in the two-week period to 58.1 percent saying they believe their business will come through the pandemic intact.

Storefronts are not nearly as upbeat. “Retail SMB owners appear to feel far less confident than they did before, however. Our analysis indicates that 28.3 percent of retail SMB owners said on April 6 that they were sure their businesses would not survive the pandemic, compared to 17.1 percent who said the same on March 24,” according to the latest PYMNTS COVID report.

A curious finding in the latest data is how few SMBs appear to have applied for SBA loans or PPP funding at all, as opposed to reducing employees’ pay and other cost-cutting moves. “Our research shows that 32.7 percent of SMBs had applied for [SBA] loans — including, but not limited to, PPP loans — as of April 6, compared to 38.4 percent who reported reducing their employee payrolls to mitigate cash flow shortages stemming from the pandemic.”

A third of SMBs polled are putting off paying bills as a way of dealing with their predicament.

“The PPP relief effort has not yet shown to be the saving grace that lawmakers and business leaders hoped it would be,” the latest report states. “This is in part because so many SMB owners have not applied for loans, and even those who have say that the loans are not likely to pull them through the entire the pandemic.”