COVID-19

Small businesses don’t see much cause for optimism

Justin Ho Jan 12, 2021
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A "Closed" sign at a nail salon in Virginia. Small business optimism is at a seven-month low as the pandemic continues to rage across the U.S. Olivier Douliery/AFP via Getty Images
COVID-19

Small businesses don’t see much cause for optimism

Justin Ho Jan 12, 2021
Heard on:
A "Closed" sign at a nail salon in Virginia. Small business optimism is at a seven-month low as the pandemic continues to rage across the U.S. Olivier Douliery/AFP via Getty Images
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Small business optimism is at a seven-month low, according to a survey from the National Federation of Independent Business released Tuesday.

Fewer companies are looking to expand, sales expectations are down and, despite the fact that borrowing money is really cheap right now with interest rates near historic lows, only 3% of businesses say they’re interested in taking on additional debt.

Back in 2018, Sophie Blake took out a business loan for her Virginia-based jewelry store because, she said, she was feeling good about the economy.

“And I was very aggressive. I was very excited,” Blake said. “We did a big renovation of our store. I felt confident at the time that we would be able to pay it back.”

Right now, she’s not so confident. Blake’s store now has a government disaster loan on its books, and it’s borrowed from the Paycheck Protection Program.

Blake said the idea of taking out a loan to expand her business like she did in 2018 is out of the question.

“I’m not sure if we’re going to be around at the end of the year if things go the way they’re going,” she said.

And that’s why most businesses don’t want to borrow any money right now, said Bill Dunkelberg, chief economist at the NFIB.

However, some companies are taking advantage of the lowest interest rates we’ve seen in a long time.

“So, the banks I’m familiar with are doing a lot of lending to small construction firms, to build one or two or three new houses, some bigger construction projects like a Dunkin’ Donuts, or small hotels,” Dunkelberg said.

At the Bank of Southern California, CEO Nathan Rogge has been looking to make loans to businesses in other industries.

“Industries that are associated with the internet [or] anything that’s medical,” he said. “We’re looking at distribution, wholesalers — all doing relatively well.”

Rogge said those are all businesses that have valuable collateral and pretty solid cash flow, considering. That’s two things a lot of other businesses don’t have right now.

COVID-19 Economy FAQs

Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?

This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.

Could waiving patents increase the global supply of COVID-19 vaccines?

India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

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