According to a report by Facebook and the Small Business Roundtable, small businesses across the US and the world are closing in on their pandemic peaks.
“It remains a very painful time for small businesses,” John Stanford, co-CEO of the Small Business Roundtable, told CNBC’s Worldwide Exchange on Thursday.
The report, which surveyed more than 35,000 small and medium-sized businesses around the world, found that 22% of U.S. small businesses closed in February. These figures were higher than the 14% in October. At its peak in May, the pandemic closed 23% of small and medium-sized businesses – only 1 percentage point higher than the current closing figure.
As the overall closure of Covid highs nears, the report found that different parts of the country are experiencing different degrees of difficulty. Some states, such as Maine, Idaho and Colorado, closed 9% -10%, while others such as New York, Pennsylvania, and Massachusetts closed at least 30%.
Within states, the report also found that certain demographics are hit harder than others: 27% of minority-led small and medium-sized enterprises showed closures, compared with 18% of others. Businesses run by women closed 25%, while 20% of men were led.
Small and medium-sized businesses are still seeing the impact of the pandemic, despite a relative setback for larger businesses. “Small businesses are really our front-line defense for the business community,” Stanford said. “They first feel the consequences, and the consequences remain the longest.”
“While larger companies with a larger capital reserve may do well, small businesses can not only take the risk of staying open, and I think we are seeing it play out with these high numbers,” he adds.
During a year of Covid closure, Congress introduced programs such as the Payroll Protection program, designed to help small businesses keep their employees on the payroll. According to Stanford, although the data show that the PPPs were small tools for small businesses, these types of programs are not sustainable for a year.
“We need to remember that PPP was a bridge program,” Stanford said. “It was meant to keep people on the payroll, it was not necessarily meant to keep businesses open.”
According to the report, 27% of small and medium-sized businesses said they had to reduce their staff – and 48% of businesses said they had to lay off at least half of their employees. Regarding the return of the employees, 51% of the companies surveyed said that they do not intend to employ former employees within the next six months.
“PPP and others have really helped us shut down the economy for a year, but I think we have a difficult road ahead,” Stanford said.
However, 18% of small and medium-sized businesses said they had hired back their employees for the past three months. The report notes that 60% -70% of workers around the world are responsible, so the prospect of re-employment is critical to the recovery of many economies.
Stanford said it was generally optimistic about the ability of small businesses to bounce back.
“Entrepreneurs are survivors. … We are reopening the economy, we are reopening states. If things return to normal, we will return quickly,” he said. “If life goes up here again in a few months, you’ll see the numbers of small businesses turn around.”