corona-virus impact on SMEs
Coronavirus is a term now familiar in every household around the world. The outbreak of novel coronavirus has brought countries all across the globe to a grinding halt. According to reports, this virus has affected 203 countries uptil now, a few of them suffering more than most. Its highly contagious nature has led to the governments everywhere being forced to implement severe isolating measures. With social-distancing as the only way to keep it from spreading and ‘flatten the curve’ some of the countries have gone into lockdown, asking its citizens to stay at home at all times unless absolutely necessary. It is an unprecedented situation that the world has found itself in. Beyond the glaring health crisis the novel coronavirus has brought upon us, countries are finding themselves with increasing new problems. The most outstanding of them all is the economic impact as a direct result of this pandemic.
There is no denying the adverse effect the virus has had on the global economy. Recession had already been forecast prior to the outbreak, but with the world coming to a standstill and all activities being put to a stop, it has catapulted us towards it. With people advised to stay home, businesses have taken a huge hit. There will be loss of jobs and some business may not open again. Business ventures like restaurants and bars (or any other customer based services) are taking a direct hit as they no longer have customers coming in and have been asked to shut down by the government for the upcoming weeks. Since there is no foreseeable end date to this crisis, it makes it even more unpredictable and troubling. All the small and medium enterprises will face coronavirus’s brutal impact for they cannot survive indefinitely without any cash flow.
The economic strain on such businesses would be the most. There are an estimated 30 million small businesses in the US alone. With most manufacturing factories and industries around the world shut down,the global supply chain has been disrupted and as a result impacting the companies. Companies unable to function with work from home policy will be looking to lay off employees to pay the bills and cover other overhead costs, and even then it may not be enough to cover all expenditure for a long period of time. Such companies do not have huge resources, unlike the large corporations, to bank upon in such situations of crisis. At the most they may be able to cover for the next 2-3 months.
The technology companies would suffer too at the hands of COVID-19. While a lot of them, mostly the IT companies, may be able to work from home, there is no way it would not affect the productivity or the quality. Without access to high-tech infrastructure, the work would be hindered causing decrease in productivity. Moreover, not all companies are acquainted with work from home concept. A team used to working in close quarters with best equipment and office space will not be able to adapt to work from home lifestyle. It requires great management that the companies are not familiar with, never having been put in such a position before. Furthermore, almost all the industries are bearing the brunt of coronavirus, shutting down their entire operations. The effect ultimately will trickle down to its lowest member. Depending on the clients they cater to, the small and medium technology company may not have enough work. As a result they may struggle to pay all their employees along with other expenditure. With limited access to credit and less cash in the bank, they may not last long.
Fortunately, there is yet a ray of hope for small and medium enterprises. The Federal government passed a $2 trillion dollar Coronavirus Aid, Relief, and Economic Security (CARES) Act on march 27, 2020 to help the people and businesses affected by the virus. It details relief funds and measures to secure and aid various sectors of the economy such as large corporations, SMEs, health care, hospitals, agriculture, as well local and state governments. For the small and medium companies specifically it provides $350 billion. Any company with 500 or less employees that is maintaining their payroll will get assistance for their cash flow. They can even get loans for their companies with minimum requirements. This is in addition to the help they may get from their state government. Other than that even Small Business Administration (SBA) is offering low interest loans to the companies in need. At these times of need, some of the large corporations are even stepping up to help the smaller companies. Big names such as Amazon, Facebook, GrubHub and Uber are in their own different ways aiding smaller companies.
So, while the road ahead is extremely tough and unpredictable, people and the government are coming together to help as much as they can. But the future is still very much uncertain and there is no escaping how this pandemic may change the face of the business world and economy forever.