The U.S. is facing a tidal wave of small business failures this fall if the federal government doesn’t provide a new round of financial assistance. https://www.nytimes.com/2020/09/01/business/economy/small-businesses-coronavirus.html?referringSource=articleShare

Mass small business failures wouldn’t just be a disaster for owners and employees. It’d be a disaster for the economy, prolonging the recession, slowing the recovery and further tilting the balance of power the biggest companies.

We’ve already seen tens of thousand of failures. But many (certainly not all) of those businesses were already weak or close to shutting down for other reasons. This next wave will hit businesses that were fundamentally strong before the pandemic.

There are three major forces threatening to hit at once: the expiration of federal aid, the end of summer and the virus itself. Let’s take them one by one.

1. Federal spending went a long way toward blunting the impact of the pandemic last spring. PPP was deeply troubled, especially in the crucial first round, but it eventually gave out half a trillion dollars in loans and saved thousands of businesses.

Aid to households, meanwhile, put money in customers’ pockets — money they then spent at local businesses. You can see the impact of the aid clearly in real-time spending data. But now it’s gone.

2. Many small businesses — restaurants, gyms, yoga studios and more — have been able to move at least some operations outside in the summer. For many, it wasn’t enough to turn a profit, but it did stem losses. But that will end once the weather turns cold in northern states.

Fall and winter are already lean seasons for many (certainly not all) service businesses. After a weak summer, many are now asking whether it’s worth trying to make it through til spring.

As Markus Ripperger, who runs the Cheers bars in Boston told me: “We just came to the conclusion, if we’re losing that much money in the summertime, what’s the winter going to look like?” The Cheers location in Faneuil Hall closed for good yesterday.

3. The virus, which as @Austan_Goolsbee keeps reminding us, remains the boss. Business is still weak in many industries because customers are afraid to go out. And epidemiologists warn is that cases are likely to rise in the fall/winter, which could lead to more shutdowns.

These forces affect businesses of all sizes. But big corporations have advantages: available credit (at rock-bottom rates), leverage to negotiate with landlords, sophisticated supply chains, delivery networks and marketing operations.
Small businesses have none of that.

Minority-owned, and especially Black-owned, businesses are at a particular disadvantage. They are disproportionately located in communities hit hard by the virus. Their owners are less likely to have savings to draw on. They are less likely to have strong banking relationships.

As Maurice Brewster, who runs a transportation company in the SF Bay Area told me: “You just can’t go a year [without revenue] unless you have just an endless pool of money to sustain you until March or April of 2021. A lot of us are going to go out of business.”

There is still time to limit the damage. Congress could still pass a successor to PPP. But a new, large-scale program seems increasingly unlikely.

As @LettieriDC told me: “Why didn’t we use the time that P.P.P. bought us to design the kind of program that would be commensurate with the national challenge that we’re facing? That’s all P.P.P. was. It was a mechanism to buy time. It was never the long-term solution.”