A Forward-Looking Perspective as Small Businesses Struggle for Survival
COVID-19 has been the defining aspect of our year of disruption, which also included a number of natural disasters and social unrest. And while there is no rulebook for managing our current crisis, the US Government’s relatively rapid rollout of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March, helped ease some of the disruption. Main programs included the Paycheck Protection Program (PPP), the Economic Injury Disaster Loan (EIDL) and EIDL-Advance.
The Paycheck Protection Program (PPP) - a loan established by the CARES Act designed to provide a direct incentive for small businesses to keep their workers on the payroll - was implemented by the Small Business Administration with support from the Department of the Treasury. The Paycheck Protection Program prioritized millions of Americans employed by small businesses by authorizing billions toward job retention and certain other expenses. Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, were eligible if they also met program size standards.
In response to the Coronavirus (COVID-19) pandemic, small business owners, including agricultural businesses, and nonprofit organizations in all U.S. states, Washington D.C., and territories were able apply for an Economic Injury Disaster Loan. The EIDL program was designed to provide economic relief to businesses that were experiencing a temporary loss of revenue due to coronavirus (COVID-19). The applying entity had to have been in business for at least a year, which could have been waived, but certainly before January 31, 2020.
Dun & Bradstreet recently analyzed data associated with both programs with a view to understanding where the programs were most effective. Our team of economists, data scientists and high-risk fraud experts looked at the following questions:
- Was the first round of government funding effecting in saving small business and stabilizing the U.S. economy?
- What can commercial organizations do to manage risk and ensure that they are on the right path for prosperity?
Answers to the above questions and other insights are provided in our report The Effectiveness of CARES Act Relief & Recovery Funding in Saving Small Businesses.
Enabling small businesses to retain millions of jobs, many in the Services sector, the PPP program mitigated the pandemic’s full financial and economic impacts by avoiding a near-immediate deluge of small business closures and B2B payment delinquencies However, the first wave of short-term funding was likely just a stop-gap that is hiding potentially bigger economic problems to come. With a second wave of the virus underway and continued debate over additional rounds of government-backed relief funding, it is critical that businesses understand the environment in which they are operating.
In addition, our analysis reveals fraudulent activity associated with these programs. The unprecedented nature of the pandemic opened the window of opportunity for fraudsters to compromise systems and company data. Sadly, fraud may be easier in a crisis. Businesses should take immediate action to protect their business identity and operations from potential maleficent activity. Our paper offers some suggestions.
Our team of certified fraud examiners found that – of the portion of data they analyzed - businesses located in California, Florida, New York, Texas and Georgia had the highest propensity of fraud investigations, with entities in Florida being 4 times more likely to be a victim of identity theft.
Looking ahead, our economists forecast a multi-speed recovery in 2021, based on geography and industry. High contact-intensive industries with proportionally larger concentrations of small businesses, for instance, will recover more slowly than others. In this regard our Small Business Health Index (SBHI) for October showed that while businesses with payments 91+ days past due had risen 3.2% and credit card payments 61+ days past due had increased by 3.7%, there was a decelerating pace of payment delinquency in recent months. In addition, Automotive and Transportation industries registered quicker improvements in delinquency rates than Manufacturing, Retail, Construction and Financial Services in October.
For more specifics and some thoughts on managing risk across business operations during the remainder of the pandemic, download our full report.