New Research Shows 100K+ SMBs Won’t Recover From COVID-19 Pandemic

The ongoing coronavirus pandemic will cause the death of more than 100,000 small and medium-sized businesses (SMBs), triggering a tsunami of bankruptcies nationwide, new research shows.

The average business has in excess of $10,000 in monthly expenses and barely enough cash on hand to survive a month, according to the National Bureau Of Economic Research (NBER). Researchers at the University of Illinois, Harvard Business School, Harvard University and the University of Chicago surveyed more than 5,800 SMBs May 9 to 11. The data suggests at least 2 percent of SMBs are already gone due to the economic fallout from the worldwide pandemic.

Some 50 percent of respondents expect that the crisis will last at least until the middle of June, which extends well beyond their current cash.

“In-person industries like personal services or retail report much lower prospects for riding out the pandemic than professional services or other sectors with minimal need for face-to-face contact,” the research indicates.

The Mid-Atlantic division had the largest share of firms that have temporarily closed, 54 percent. The Mountain region was least affected, with 39 percent of firms temporarily closed.

Further, research from the National Restaurant Association indicates that 3 percent of restaurants are closed and 11 percent are expected to do the same before the crisis is over. The association sent a letter to Congress along with its Restaurant Industry Blueprint for Recovery outlining what the government can do to help the industry survive and come back.

Mark Zandi, chief economist at Moody’s Analytics, said he doesn’t see how there will be sustained economic growth until there is a vaccine. He warned that if businesses reopen too soon and there is a second wave of infections, the U.S. will sink into a depression.

A survey by the U.S. Chamber of Commerce shows that one in four small businesses fear they are less than 60 days from closing permanently, and one in 10 said they are less than one month away from permanently going out of business.

The recent PYMNTS report Main Street On Lockdown: The COVID-19 Cash Chasm shows that the average SMB has enough cash to stay open for 37 days as of April 6.