Impact of COVID-19 upon Small Businesses

ByPayal Mittal
April 9th . 5 min read
Impact of COVID-19 upon Small Businesses

COVID-19 (Corona Virus Disease 2019) pandemic has unleashed itself upon the world and in a small period of just 2 months, has broken down the backbone of global economy.

Started as an epidemic in Wuhan of China, it has now turned into a global crisis. This outbreak was so sudden that nobody was prepared for it, even the Supreme Power (United States of America) was unable to recognize its devastating consequences.

By the time, the World Health Organization (WHO) warned the world about it and declared it a pandemic, it was too late. It had already set its foot across many continents. Though South Korea and China seem to have flattened the curve, the wrath of COVID-19 has just begun in other countries.

The situation has aroused fear and frustration amongst the population all around the world and the small business companies are left in a state of uncertainty, having both new opportunities and risks.

In the midst of such a crisis, several questions are occupying the minds of SMEs such as how to survive this outbreak? Are they even going to survive it? How does it going to impact their business and market? What can be expected from the post-pandemic market?

This blog is an effort to provide appropriate answers to all these suspicions along with stats derived by various surveys and researches-

Impact of COVID-19 Crisis on Small Businesses-

“The global outbreak of corona-virus came with a huge impact on various industries. From tailored product launches, cancellation or delay of major events, supply chain halted (shipments from China mainland), production delays to many other influencing factors.”

COVID-19 is as much contagious economically as it is medically. These are the distressing times for small businesses, daily workers, and small manufacturing units as the effects of this outbreak are catastrophic for them.

The economy is crashing, companies are shutting down, and people are losing their jobs. It will not be wrong to assume that the whole world is on the verge of falling down into the trench of unemployment and poverty.

According to a Goldman Sachs survey conducted in the USA on more than 1500 small-sized businesses and here’re the results (not very enthusiastic at all)-

  • 51% say their business will only be able to continue to operate for 0–3 months.
  • 96% say they have already been impacted by the outbreak.
  • 75% say their business has been impacted by fewer sales.
  • 53% say their employees don’t have the ability to telecommute.
  • 13% are confident about their contingency plans to maintain.

If proper steps were not taken against it at the right time, the world’s economies would face a severe recession they had never seen before, even in the face of World Wars and other global crises.

Assuming that even if proper actions are taken, it may take years for the economy to recover the damage and reach to normalcy. This is the case for G7 countries, the situation will be worse for developing countries.

“Michael Hicks, an economist at Ball State University, calculates that 28 million jobs or one in six U.S. workers are going to lose their jobs.”

India, being a developing country (and at an amazingly fast pace), had been expecting to achieve a $5 trillion economy by 2025 with a huge contribution from the MSMEs, could suffer substantial losses from the COVID-19 outbreak.

How Can Small Business Survive Amidst Corona Outbreak??

Businesses are shuttering worldwide, and others are afraid of whether they will survive this outbreak or not. Only those who have gone digital are operating well which includes IT & software, digital marketing, and equivalent companies.

Here’re the few steps the small businesses can take to last in this pandemic period-

  • Organizations are in the need for digital transformation. It’s time to shift to complete remote-working or work-from-home through various digital platforms to minimize business disruption.
  • To remain in the market, businesses need to engage more with social media.
  • Brands can channelize their businesses towards supporting healthcare professionals who are fighting against COVID-19 and advertising about precautions against it.
  • Businesses should adopt new ways of marketing and agile methods to address customer needs.

Well, the businesses can expect great help from the respective governments. Let’s check what the world leaders have planned to handle this crisis-

Government Aid Plans for SMEs

If your business has faced a great deal of loss and struggling to gather funds, it might be a relief that it’s not all over yet, the governments all over the world will be there to back you up.

The governments, worldwide, have come forward and announced proper financial aids and legislation to provide low-interest federal disaster loans amid this pandemic to help out the SMEs and restore their economies.

For instance,

  • The US Small Business Administration (SBA) is going to offer Economic Injury Disaster Loan assistance for small businesses to help them recover from the economic injuries caused by COVID-19. Also, the CARES Act (Coronavirus Aid, Relief, and Economic Security) has been signed to help individuals as well as businesses affected by the coronavirus pandemic.

“There are speculations that the US is looking at a Senate vote to roll out a $2 trillion package, touted as one of the largest rescue packages in American history.”

  • Italy has come up with an Emergency Plan of 28 billion dollars to recover from economical losses. The European Commission has approved various support measures and aid rules for the Italian States such as direct grants, tax advantages, loan approval for companies, subsidized public loans, and short-term export credit insurance.

  • Indonesia announced a total of $733 billion stimulus package to rescue its travel, aviation, and property industries.

What Can Be Expected from The Post-Pandemic Market?

What chaos this corona outbreak will lead the world into is, indeed, hard to imagine. But there is a way to have a quick look into the future-market by getting insights about the market and economic status of China.

Yes, we have a good example of China before us, we can learn a few things from it and can take essential measures to minimize the losses.

The ESIEC (Enterprise Survey for Innovation an Entrepreneurship in China) team led a rapid follow-up survey that reflects the impact of COVID-19 upon the small and medium-sized businesses in China.

According to the team,

“Our survey shows that COVID-19 has landed a heavy blow on Chinese SMEs, with huge differential effects across sectors and regions.”

Let’s see what the survey says -

  • 14% of the surveyed firms will not last more than a month and 50% not more than 3 months due to a lack of cash flow.
  • 80% of the surveyed firms haven’t resumed work, at all, and 40% of those who are going to resume their work, are not able to determine the eventual timeframe for resumption.
  • The export firms in China have suffered more compared to non-export firms because they provide employment for many migrants. Being one of the biggest exporters, the implications are huge on the global supply-chain stability of this export slowdown. There’s been a 17.4% dropdown of China’s exports in the year 2020.
  • While upstream firms are suffering due to labor shortages, the downstream firms are facing more grave challenges due to supply-chain halt and consumer demands.

Final Words-

The COVID-19 has emerged fiercely at unprecedented speed on the global level. Almost the whole world is under lockdown, as a result, the commercial and business activities have been seriously affected.

It seems like another time in another world when everything was good and the world economy was growing just fine and a small virus, appeared out of nowhere, derailed the global economy just in a few months.

With these fine final words, cited by an economist at Bangkok University, I’ll end this blog-

The economy is a complex system that faces shocks, stumbles a bit, and returns to its original state or even better state. It’s like elastic, stretch it and leave, it will come to its original state. How many times have the world economy faced natural disasters and wars? Each time it gets small glitches here and there but, in the end, it rebounds and grows more expansive than ever. We can learn a lot from Japan, faced an atomic bomb, tsunami, and several other disasters, but today, it is listed among the most developed countries.

“We may lose some momentum, but after a short stumble, we push forward.”

Thanks for reading this blog!!