Economy

More SMBs Throw In The Towel After Lockdown Restrictions

closed sign

The resurgence of the COVID-19 has delivered a crippling blow to many small businesses, The New York Times reported.

In places that had reopened such as Texas, Florida and California, it could be enough to close them permanently.

Texas karaoke club owner Mick Larkin should know.

On June 26, the owner of Krank It Karaoke in Wichita Falls filled the frozen margarita machine, spent $1,000 for masks and hand sanitizer as he prepared for the weekend rush, The Times reported.

On the same day, Texas Gov. Greg Abbott took his most drastic action yet to respond to the post-reopening coronavirus surge in the Lone Star State. He shut bars for a second time and ordered restaurants to reduce their capacity by half.

Upon hearing the news, Larkin tossed his purchases into the trash and closed the club for good.

“We did everything we were supposed to do,” Larkin told the newspaper. “When he shut us down again, and after I put out all that money to meet their rules, I just said, ‘I can’t keep doing this.’ ”

It was a nightmare for the nation’s small businesses in March when governors imposed lockdowns to contain the pandemic. But many coped, trimmed staff and nonessentials while others took advantage of the Small Business Administration’s Paycheck Protection Program.

But the second round of closing could be the death blow of many of the same small operations.

As of mid-June, 140,000 businesses listed on the Yelp review site remained closed due to the coronavirus pandemic. And of all the business closures since March, 41 percent have shuttered permanently, according to Yelp’s latest Local Economic Impact Report.

Harvard University researchers are convinced the number of business closures is higher. They estimated 110,000 small businesses closed permanently between early March and early May, the NYT reported.

Satyam Khanna, a resident fellow at the New York University School of Law, told the newspaper if grouped together, small businesses equal the country’s biggest employers. When they close, an entire sector of the economy suffers, he said.

In the latest PYMNTS’ Main Street On Lockdown series, the Business Recovery edition revealed there were some bright spots for small and medium-sized businesses (SMBs) that are using the pandemic to make operational changes and bring their online presence up to date.

The COVID-19 pandemic has been a catalyst for small firm innovation, with 72 percent of SMBs improving or adding digital capabilities since the crisis began. The survey also found 49 percent have either improved upon existing online order-ahead for pickup features or added new ones during the past 10 weeks.

Last month, Amol Helekar, principal at investment firm TCV, told PYMNTS while businesses have been impacted by shelter-in-place restrictions, it’s been an opportunity for them to develop their digital strategies.

Still, a PYMNTS survey in May found the majority of SMB owners remain attached to their pre-pandemic business models, even though they recognize that consumers’ expectations are likely to change going forward.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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