Small businesses need grit, creativity and cash to survive coronavirus

When people talk about small businesses they often use words like “resilience,” “grit” and “entrepreneurial spirit.”

Those business owners are going to need all of that and more as they seek to rebuild amid the economic and human carnage of the COVID-19 pandemic. The virus brought large swaths of the economy to a near standstill for the past two months and killed more than 100,000 Americans so far this year.

“Running a small business is not for the weak. It is not for the faint of heart. It’s a contact sport,” said Scott Koorndyk, president The Entrepreneurs Center in Dayton. “Then COVID comes along and changes the relationship with the customers and changes the relationships within the general market and that’s hard to weather when you didn’t cause it to occur. It’s really an existential kind of threat.”

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The COVID-19 pandemic and the stay-at-home orders took a toll on most businesses. But experts say small businesses were particularly hard hit because they typically have only a month or two of cash on hand and because so many of them are customer-facing, such as restaurants, bars, retail stores, barbershops and salons. Those businesses had had to shut down partially or completely to comply with Ohio Governor Mike DeWine’s March stay-at-home order.

In Ohio more than 41 percent of small businesses surveyed by the U.S. Census Bureau said they had experienced a large negative effect from the pandemic and another 46 percent said it had a moderate negative effect, according to data collected during the week of May 17.

Nearly 42 percent of Ohio small businesses surveyed anticipate it will take more than six months to return to normal operations, and more than 11 percent believe their business will not return to normal operations relative to a year ago, the survey found. Ohio’s results tracked closely with what small businesses nationally said on the survey.

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“In two weeks we went from a pretty robust economy to falling off a cliff.” said Roger Geiger, Ohio state executive director for the National Federation of Independent Business. “I can tell you, unfortunately I think there’s going to be a lot of small businesses that don’t survive. And that number is going to be greater than people think.”

Interviews with more than two dozen economists, business leaders and government officials found broad concern about the impact of the COVID-19 crisis on small businesses, which play an important role in job creation and community vitality. What lies ahead for small businesses depends greatly on stemming the spread of COVID-19 infections until a vaccine is developed and on how well those companies can restore revenue, adapt to to the changed economic and health landscape and find new ways to do business, according to those interviewed.

“Every path to recovery requires that we first get the pandemic under control,” said Bill Adams, a Toledo-based senior economist with PNC Financial Services Group. “Even if the economy is reopened, if customers don’t feel safe going out and spending again then the demand still won’t be there.”

Small businesses are ‘lifeblood’

Small businesses are generally defined as companies employing fewer than 500 people, but many are much smaller. There are 950,000 small businesses in Ohio and they employ about half of the state’ private sector workers. Locally owned small businesses are often the ones that support Little League and charities and take leadership roles in the community, said Geiger.

And when consumers spend money at a local business, more of the money stays in the local community to be spent again, rather being sent to a corporate headquarters somewhere else, said Bill LaFayette, owner of Regionomics LLC, a Columbus consulting firm.

“Supporting these small businesses has a ripple effect throughout our entire local economy,” said Chris Kershner, executive vice president of the Dayton Area Chamber of Commerce. “These local businesses are the lifeblood of our economy. We need small businesses and they need us.”

Sandy Gudorf, president of the Downtown Dayton Partnership, said the crisis had a terrible impact on downtown’s small businesses — many of them restaurants or retail — but she said the business owners were innovative in finding new ways to do business. For example, she said, Tender Mercy, a brand new bar in Dayton that had to close due to the state order converted to selling groceries online for curbside pickup under the name Mercy Mart.

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“Our businesses have been so very creative. They’re fighting for every curbside pickup. They’ve adapted. Some of them have changed menu items. Some of them have put family deals together,” Gudorf said.

She believes that businesses in the once-thriving downtown will come back. But with entertainment venues closed and weekly announcements of additional event cancellations, she knows uncertainty will remain until there is widespread testing for COVID-19 and eventually a vaccine.

“I don’t think there is any value in sugarcoating all of this,” Gudorf said. “We are going to have to rethink how we use our public spaces and how we do things differently.”

It is too soon to know how many of Ohio’s small businesses will shut down permanently because of the pandemic, said Lydia Mihalik, director of Ohio’s Development Services Agency.

“What we do know is that it will be significant. Because this is unprecedented territory for us,” Mihalik said. “With the very blunt and necessary action that was taken to flatten the curve it created a lot of stress. There were small businesses that were financially healthy enough to weather this. And there were those that were not.”

Government help is key

Adams said how well small businesses recover also depends on the level of support that sector gets from government.

“There I think the news is much more reassuring in this 2020 crisis than what we saw in 2008-2009,” Adams said.

He said the federal government has taken a more aggressive approach than was used in the Great Recession to financially support businesses.

He pointed to the Federal Reserve’s Main Street Lending program and the $2 trillion CARES Act. That coronavirus relief package approved in March funded enhanced unemployment benefits, stimulus payments to individuals and two loan programs: the new Paycheck Protection Program and an expanded Economic Injury Disaster Loan program. PPP loans can be forgiven and the EIDL loan advances don’t have to be repaid.

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Many businesses “face liquidity issues: not having enough cash flow,” said Ohio Lt. Gov. Jon Husted. “I think those businesses that have been able to access the Paycheck Protection Program have found it to be very valuable.”

Jerricha Hoskins, founder and chief executive of Arcani Coil Care in Dayton, said the $8,000 PPP loan she obtained allowed her to pay overtime costs as her online hair care products business boomed during the shut down. She said she was able to keep up with demand by ordering thousands of plastic bottles before getting them became impossible and she hired six more people to round out her staff of about 20.

“The ability to employ people during this pandemic when corporations are shutting down is amazing,” said Hoskins, “A few of the girls that work for me they are in the hair industry, they are nail techs and hair stylists. They were able to come to work and pay their bills.”

Nationally more than 4.4 million PPP loans worth $511 billion, were approved, with Ohio small businesses getting 129,626 loans totaling nearly $18.2 billion, according to Brooke DeCubellis, public affairs specialist for the U.S. Small Business Administration, which oversees the two lending programs.

The average loan in Ohio was for $140,000, said Rob Scott, Great Lakes regional administrator at the U.S. SBA and a Kettering councilman.

Ohio small businesses received 10,408 EIDL loans totaling $889 million and 73,000 loan advances worth $252 million, DeCubellis said.

“Had it not been for the federal programs, especially PPP, I think the devastation would be a lot worse than it is,” Geiger said.

About $148 billion in PPP money remains available and Scott said, with the rate of applications slowing and the amounts being borrowed declining.

“That tells me it is reaching the smallest of small businesses,” he said.

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The rocky roll out of the PPP program was widely panned for moving too slowly and allowing some larger, publicly traded companies to get money intended for small businesses. But Scott, who went to Washington to help start the program, said it is amazing that the SBA was able to set up the new loan programs so quickly and do far more loans than it had in the past.

“Was it perfect? No. Could we have done things differently? Yes,” Scott said. “But I don’t think you could really ask for much more from the SBA.”

Businesses and state and local government leaders have called for Congress to provide additional aid, and the U.S. House of Representatives passed a $3 trillion aid package, but the U.S. Senate has not considered a new stimulus bill.

Koorndyk said he agrees with Fed Chair Jerome Powell’s assessment that more fiscal and policy help will be needed to help businesses weather the economic downturn.

“If it was working in February it will work again. We’ve got to carry companies to the point where the world works for them again,” Koorndyk said. “If that means additional support programs come online that is what is needed.”

Adams said the government assistance for private individuals is also key to economic recovery.

Increased unemployment compensation and one-time stimulus checks eased the hit on household income, which Adams said could benefit businesses as consumer confidence grows along with the reopening of the economy.

Staggering job losses

But even with the government assistance, those interviewed said that nearly three months of businesses being closed or vastly curtailed has had an undeniable impact.

Nearly 1.5 million Ohioans filed initial unemployment claims in the last ten weeks, including independent contractors and others who the CARES Act made temporarily eligible for unemployment compensation, said Bret Crow, spokesman for the Ohio Department of Job and Family Services.

Nationwide 40.7 million initial unemployment claims were filed during that period.

Coronavirus: Complete coverage

State data doesn’t show how many of the unemployed worked at small businesses. But according to the Opportunity Insights National Economic Tracker the number of hourly employees in Ohio small businesses was down by 30.6 percent as of May 23 compared to early January. The national decrease was 39.4 percent.

At the worst point, on April 13, the number of small business hourly employees declined 60 percent in Ohio and nationally compared to early January, according to Opportunity Insights, which is non-partisan, not-for-profit organization located at Harvard University that studies economic indicators using anonymized data from private companies like credit card processors and payroll firms.

“The longer people are temporarily furloughed, and businesses are temporarily closed the more those furloughs and closures turn into permanent job losses and business closures,” Adams said.

The NFIB’s recent survey of its Ohio members found that 41 percent are worried they will not get back the customers and sales lost during the shut down.

“My plea is to the consuming public. I hope they think about shopping small businesses,” Geiger said. “Your small businesses really need your business right now.”

About four in ten Ohio restaurants closed since mid-March and about 3 percent will not reopen, according to surveys by the Ohio Restaurant Association. The survey also found that by early May, before the stay-at-home order was lifted for restaurants, nearly half of the state’s 23,000 restaurants had year-over-year sales losses of more than 70 percent and about half of the 585,000 restaurant industry employees were laid off or furloughed.

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“It’s a challenging time. That can be said for everybody. Restaurants have been hit incredibly hard, just because of the nature of the business,” said Homa Moheimani, manager of media and communications for the association.

A few Dayton region restaurants have announced they will not reopen, including Zombie Dogz and the Dayton Club in Dayton, Ruby Tuesday in Washington Twp. and Seasons Bistro and Grille in Springfield, said ShanonMorgan, president of the Miami Valley Restaurant Association. She said she has heard of some others that she could not name, but thinks the community's strong support of restaurants will mean fewer than 3 percent close locally.

“From the ones I know for sure I would say it’s less than 1 percent,” Morgan said, adding that about 80 percent of local restaurants and bars that served food managed to keep some level of operations going since March.

Restaurants are now allowed to reopen but must follow social distancing rules and use face masks.

Karen Gagnet, co-owner of Cocos in Dayton, kept the restaurant open with two full time and one part time employee, compared to the 22 she employed before the pandemic. Gagnet has now reopened the dining room and is gradually bringing back staff, using the PPP loan she obtained to pay bonuses to those who come back. She intends to continue curbside service as well and said the ability to adapt is critical for small businesses.

“I always feel the solution to all of life is creativity,” said Gagnet. “This building, this business is my baby. She requires things. I almost treat her like an energy. She’s a big beautiful building and present and I’ll do everything I can to keep nurturing her and feeding her.”

Not all businesses suffered

There are a huge variety of small businesses so not all were economically impacted by the COVID-19 crisis.

For example, defense contractors and technology firms tended to continue doing business, often by having employees telework from home.

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Angela Fronista, president and chief executive of military contractor BTAS in Beavercreek, said the company quickly worked with defense department contracting officers to allow the business technologies and solutions company to telework. Employees worked from home and the company was able to keep working on its contracts. Going forward, Fronista said, the big question is what will be the “new normal.”

“What I do not want to do is make decisions out of fear,” she said. “When I see people latch on to the fear aspect I get concerned because I don’t believe that is the way to run a business or make decisions. We need to be cautious and careful.”

Some companies pivoted to making medical products, including personal protective equipment, and others, like disposable thermometer manufacturer Tempagenix in Dayton, found their services were in greater demand because of the pandemic, Koorndyk said.

Some information technology companies also saw business grow as people began working from home and as telehealth and telelearning became the norm, said Melissa Cutcher, executive director of Technology First, a trade association for Dayton region information technology professionals and providers.

Manufacturers deemed essential also continued operations and quickly adapted operations to comply with safety requirements, said Angelia Erbaugh, president of the Dayton Region Manufacturers Association.

“The challenges they are facing now, which will likely be the “new normal” for months to come are issues related to supply chain — delays in receiving the materials they need to manufacturer their products — and cash flow — customers taking longer to pay them,” Erbaugh said.

The region has taken some hard economic hits over the past decade and 2019 was a particularly hard year because of the devastating Memorial Day tornadoes and the August mass shooting in the Oregon District. Now there is an unprecedented health and economic crisis. But many of those interviewed kept coming back to a belief in the region’s ability to bounce back.

“As our economy has fluctuated up and down the Dayton region demonstrates an overwhelming amount of resiliency,” said Julie Sullivan, executive vice president of regional development at the Dayton Development Coalition. “When things go down we pull ourselves up by our bootstraps, we pivot, we create an opportunity that is viable in the future.”

By the numbers: federal Paycheck Protection Program small business loans

$511 billion in loans approved in U.S.

$18.2 billion in loans approved in Ohio

4.4 million loans in U.S.

129,626 loans in Ohio

Source: U.S. Small Business Administration as of May 23, 2020

Impact of COVID-19 on small businesses-U.S. and Ohio  
Here are some key responses from the U.S. Census Bureau Small Business Pulse Survey conducted May 17-23, 2020*U.S. Ohio
Large negative effect from pandemic45.0%41.4%
Moderate negative effect from pandemic41.5%46.1%
Little or no effect from pandemic10.1%7.5%
Returning to normal operations will take three months or less16.1%18.7%
Returning to normal operations will take four to six months23.7%22.4%
Returning to normal operations will take more than six months41.8%41.7%
Do not believe this business will return to usual level of operations relative to one year ago10.0%11.4%
There has been little or no effect on usual level of operations relative to one year ago8.4%5.8%
Sought federal Paycheck Protection Program loan74.6%80.4%
Received federal Paycheck Protection Program loan69.4%77.3%
Did not receive financial assistance from any federal program since March 13, 202025.9%18.4%
*Those surveyed were non-farm, single-location employer businesses with 1 to 499 employees and receipts of $1,000 or more.  
U.S. Census Bureau 

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