PPP Won’t Fill Main Street SMBs’ Cash Gap

Main Street small businesses have differing timeframes as to when they expect to run out of operating cash, but they all see it coming. And their confidence hasn’t improved despite reports that infections are flattening, that ICU admissions are down or that “help is on the way.”

PYMNTS began sampling the sentiments of more than 700 U.S. SMBs on March 24, attempting to gauge the COVID-19 impact “…on Main Street SMBs, the mix of establishments that define the social, cultural and economic character of our country’s cities and towns. This mix of SMBs includes retailers, restaurants, professional and personal services firms, contractors, manufacturers, wholesalers and tech firms. They range from operating in small towns to large cities. The average firm had 28 employees and revenue of $1.5 million.”

Surveying SMBs every 10 days, PYMNTS’ findings show the dire situation business owners face.

SMBs we spoke to on March 24 were gravely concerned and still in the dark on details regarding government aid. Business owners then began applying for the Payroll Protection Program (PPP) after that program went live on April 3, although in lower than expected numbers.

On April 6, however, with SBA loan details announced and payroll bailout machinery in motion, respondents were statistically unmoved. On April 6, as on March 24, one in four owners still believed their businesses wouldn’t make it past the pandemic; four in 10 remained unsure.

A cash vacuum among SMBs is rippling, leading to painful decisions to delay paying rent, utilities and even suppliers. As a summary of the latest poll notes, “…most Main Street SMBs lack enough of a cash cushion to survive what they believe will be the duration of the pandemic, even if they get a PPP rescue relief grant,” adding that, “Seventy-one (71) percent of … SMBS have done the only thing they feel they can do when revenue goes to zero or near-zero overnight: reduce payroll (38 percent) and stop paying their bills (33 percent).”

It’s clear that time is running out for the Main Street SMBs that were in existence when COVID-19 hit. The takeaway from the latest poll is that unless government bailout cash materializes instantly, even the most bullish Main Street businesses have about 70 days of cash left.

“On average, the Main Street SMBs we studied report a cash gap of roughly four months,” according to the PYMNTS analysis. “One hundred and thirteen (113) days is the gap that most of these businesses project between the time they say they will run out of cash and when the pandemic is expected to end, at which point their businesses can resume normal operations.”

Even with an immediate cash injection from the PPP, Main Street SMBs expect cashflow to dry up 53 days too soon on average.

See the complete research, charts and in-depth analysis here.