This article addresses:
- Benefits of opening a small business
- Challenges posed by COVID-19
- Overview of global supply chain disruptions
- Post-COVID opportunities for small business owners
- Overview of loans and business assistance programs
Small businesses are vital to the economy. They account for a significant chunk of all businesses in the country and employ countless people across diverse industries. Even before the pandemic hit, small businesses faced several fundamental challenges that have only increased after COVID-19.
Prior to the coronavirus pandemic, many small businesses already had slim margins that were difficult to sustain in the face of declining demand and increased compliance costs.
When the economy shut down due to CDC and government mandates, many entrepreneurs werenât in the position to weather the storm.
Small businesses were hit the hardest by the lockdowns. A report from the Facebook & Small Business Roundtable found that by mid-April 2020, almost a third of small businesses had temporarily stopped operating. By the following month, more than half had either laid off or furloughed employees.
In sum, it was a devastating time for small businesses, employers, and employees. To say nothing of the many lives that were lost to the coronavirus outbreak.
Fast forward to today, and as the economy picks up steam, many of these small business owners are now wondering whether they can start their businesses again. While others are wondering if the timing is right for them to become first-time entrepreneurs.
This article will look at the benefits and opportunities available to you if youâre considering starting a company of your own.
The Benefits of Opening a Small Business
Despite all of the challenges that come with it, opening a small business can be a very rewarding experience. Being an entrepreneur offers unparalleled independence and control, plus the exhilarating sensation of making an impact on the world through your own passion and creativity. As an entrepreneur, you are able to transform your vision into reality on your own terms and build a business that’s consistent with your values.
But beyond the feelings of personal empowerment and being your own boss, owning a small business is also a great way to serve your community by delivering personal and higher quality service to your customers. Unlike large corporations that may not be invested locally, small businesses are able to grow with their customersâ needs by adapting their services to a hyper-local market.
And in fact, many patrons now prefer buying local and supporting businesses in their communities over large organizations. This sentiment has swept the nation in recent years and is likely to grow even stronger.
How COVID-19 has created unprecedented challenges for small businesses
Starting a small business is challenging in a great economy, it’s a monumental undertaking in a tough economy. The coronavirus pandemic has further complicated things by creating challenges that didnât exist in the pre-COVID world
In this day and age, businesses thrive on connectivity and on the seamless movement of raw materials and finished goods. The pandemic resulted in supply chain disruption at scale, as factories across the globe were closed, cargo ships were left without any cargo to transport and ports didnât have any workers to tend to them.
From container and labor shortages to port congestions and COVID-19 restrictions, global trade is clearly in uncharted waters.
Things may get worse before they get better even as the pandemic winds down. Consider this: The Shanghai Containerized Freight Index spot rate on the crucial Shanghai-Europe route was below $1,000 per TEU (twenty-foot equivalent unit) in June 2020. It surged to almost $4,000 per TEU by the end of 2020 and nearly doubled to $7,345 by the end of last year.
This poses a significant challenge for small businesses that rely on materials and products from overseas. It directly impacts their bottom line as the higher costs have to be adjusted in their prices. Itâs a double-edged sword as higher prices could potentially diminish their competitiveness in the market, or at the very least, reduce total sales.
The pandemic has also caused a severe economic downturn, the likes of which have not been seen for over a decade. After the 2008 recession, it took small companies six years on average to return to their pre-crisis contribution to GDP. It remains unknown how long it will take for businesses to recover from the current recession. Some may never reopen.
Most small businesses were already at risk before the pandemic hit. Research conducted by the Federal Reserve found that only 35% of small businesses in the country were financially healthy by the end of 2019. The unhealthy ones were three times more likely than others to close down or sell in response to a revenue shock, which the COVID-19 pandemic delivered in due course.
Consumer spending is yet to return to pre-pandemic levels and it may take considerably longer than expected. The economic downturn caused by the pandemic has been severe. Millions across the country lost their jobs and curtailed their spending. The risk of new variants reversing the progress made so far still exists.
Consumers remain cautious about future prospects and continue to avoid expenditures that they now deem to be unnecessary. This has impacted the ability to generate new business. People just arenât willing to take as much liberty with their money as they used to do before the pandemic.
The post-COVID opportunities that small business owners should take advantage of
All is not lost, however. There have been pushes from the federal government and other stakeholders to achieve collaboration across the entire economy to help small businesses stay in business.
The Paycheck Protection Program was one such effort. This was a loan program backed by the Small Business Administration to help businesses keep their workforce employed during the pandemic. Small business owners could apply for these forgivable loans which were equal to 2.5 times the applicant’s average monthly payroll costs.
This proved to be a significant lifeline for small businesses across the country. It prevented the economy from suffering further job losses by enabling business owners to keep employees on the payroll without going under.
The deadline to apply for a PPP loan has since passed, but there still remain opportunities that small business owners should take advantage of.
American Rescue Plan
The American Rescue plan was announced by the Biden administration to put the economy on the path to recovery. In addition to several other measures, it provides support for the hardest-hit small businesses, particularly those owned by entrepreneurs of color.
Ten billion dollars was provided to state governments to fund small business credit expansion initiatives. This much-needed capital injection improved state small business support and capital access programs, facilitated loan participation, and enabled credit guarantee programs.
Small businesses were also provided with tax benefits to help with their recovery. The Employee Retention Credit allowed them to offset existing payroll tax liabilities by up to $7,000 per employee, per quarter.
Small Business Administration Loans
Entrepreneurs looking to start a small business should consider SBA loans. These are slightly different from the conventional small business loan not because the Small Business Administration itself is giving out loans. Rather, the SBA guarantees the loans, which are made by partner lenders such as banks and other financial institutions.
The SBA loan program has existed for decades and remains a crucial resource, particularly for small businesses that are just starting out.
Since the loan is guaranteed by the SBA, small businesses that may otherwise be unable to secure a traditional small business loan, due to not meeting cash flow requirements, for example, are able to get the financing they need to get started. These loans also tend to have lower rates and fees compared to non-guaranteed loans.
Some SBA loans even provide startup business owners with continued support so that they have assistance as they start and run a new business, a process that can certainly be overwhelming for many entrepreneurs. Additional benefits of an SBA loan include lower down payments, flexible overhead requirements, and even no collateral required for some loans.
Leverage the Power of e-Commerce
In 2022, no business model can be effective long-term unless it has a strong online presence. For many companies, e-commerce is a way to increase revenue without expanding their geographic footprint.
The vast majority of consumers now start their purchase journey for both products and services by searching online. They look for reviews, examples, how-toâs, and new ideas. When they see an ad for a new product or brand, theyâre looking for reliable information on whether or not they can trust it.
Itâs imperative for small business owners to have an e-commerce solution that enables their customers to seamlessly browse and pay for their products online. They can leverage any of the leading e-commerce platforms to quickly create an online storefront that handles everything from inventory management to payments.
And make sure you have enough information available on your site. If youâre an unknown brand and just list your products and services, your site wonât be as effective as it could be if you were to provide suitable information for your target customers.
Gain new customers through digital marketing
Digital marketing is a tried and tested method for bringing in new customers. Any business plan for a new startup should include provisions for digital marketing. Business owners can rely on social media and other marketing platforms to run highly targeted campaigns for increasing brand awareness and sales.
A good digital agency will also be able to show you what your competitors are doing, whatâs working for them, and what isnât. They can then utilize this information to structure your campaigns and ideally help you achieve better results.
Social media levels the playing field for small businesses as it rewards creativity and imagination. Campaigns that are unique and manage to capture the audienceâs interest will drive unmatched engagement, and you can even outperform larger brands.
Because your campaigns leverage algorithms, as your success increases, youâll be able to increase your effectiveness through audience segmentation and targeting.
How small business owners have used financing to grow even during the pandemic
During periods of tough social distancing restrictions and mask mandates, business owners had to adapt. Manu Rampal, the owner of East Meadow Wine and Spirits, offered customers the additional options of both curbside pickup and delivery. This strategy proved to be a success and allowed the business to grow even during tough times.
Rampal took full advantage of this opportunity to scale his business but lacked the necessary capital to fund it. He worked with Biz2Credit to acquire the funding, the loan was approved in under 24 hours and was disbursed into his bank account in less than 48 hours after applying.
Biz2Credit can help you get the financing you need for your business in less than 24 hours. Get pre-qualified in seconds today!