Economy

The COVID-19 Eclipse Darkens Main Street Commerce

Main Street

The 1918 Influenza pandemic. The Great Depression. World War II. The 9/11 attacks. The HIV epidemic of the 1980s and 1990s. Such events demarcate and define entire eras in U.S. and world history. Now, add to that list of infamous chapters the COVID-19 pandemic.

Documenting and quantifying the scope of this catastrophe, PYMNTS rapidly fielded a series of surveys of various market segments to gauge business and consumer sentiment as major U.S. cities await “the surge” of COVID-19 cases anticipated nationwide by the end of April.

The third installment, “Main Street On Lockdown: How SMBs Are Coping With The Economic Fallout Of COVID-19,” measures economic devastation to America’s 29 million small and medium-sized businesses (SMBs) in March, the first full month of novel coronavirus impact.

Lockdown By the Numbers

PYMNTS surveyed more than 200 SMB owners March 24-25 across verticals, geographic locations and company size, asking how their business outlook has radically changed in just about eight weeks, and how the current picture differs from their pre-coronavirus outlook.

Probably the most sobering statistic in the latest findings is this: one in four SMBs are dubious that their business can endure the abrupt loss of cash flow. About 40 percent are confident they’ll make it through. And, as the report states, “Technology and manufacturing industry SMBs are the most likely to say they will be unable to weather the storm. Our research shows that 39.1 percent of those in the manufacturing industry expect to go under before the pandemic ends, for example, as do 46.7 percent of those in the technology sector.”

While a fairly surprising number of SMBs (over 43 percent) said they have cash reserves to last through a more protracted economic downturn, a combined 63 percent have either zero cash reserves (32.4 percent) or enough cash for a short-duration event (30.7 percent).

“Stable SMBs are the most likely to have ready access, but even firms with cash on hand worry they may not survive the pandemic,” the report states. “Our research shows that 62.9 percent of unstable and 62.9 percent of unsure SMB owners say they have cash reserves available. That so many SMBs are uncertain about whether they can survive — despite having access to emergency reserves — speaks to how dire the pandemic has been for Main Street businesses.”

An interesting though not unexpected finding is the extent to which SMBs will rely on credit cards to get through this historic shutdown. While just under half of SMB respondents said they’ll liquidate investments and assets for cash, the report states that “… 49.1 percent say they could use their personal credit cards, 25.5 percent could tap into personal bank loans and 16.4 percent could take out mortgage loans against their houses to free up the necessary cash.”

Mass Closings and Much Maneuvering As SMBs Await Rescue Cash 

Dire findings from the fourth week of March 2020 continued, with PYMNTS’ COVID-19 polling revealing that more than 30 percent of SMBs have closed temporarily, and over 4 percent have gone out of business in the short time it took the coronavirus to infiltrate American cities and towns.

The $2 trillion government stimulus package is meant to be the first spark that reignites what had been the most vibrant and dynamic U.S. economy since the 2008 market meltdown. In our March 24 poll, one-quarter of SMBs said they had filed for government assistance, but only half had yet to received anything. That assistance is the only light in the darkness at this moment.

“Not all SMB owners who have asked for financial assistance have received it, but those who have tend to be more optimistic about outlasting the pandemic’s effects,” the report states. PYMNTS found that over 72 percent of SMBs who feel confident that they’ll survive have received government assistance.” Also, nearly 77 percent received assistance from their banks and 55.6 percent approached vendors with new made new payment arrangements.

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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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