One-third of NYC small businesses won't survive pandemic, civic leaders say
Months of temporary closure has left many small business owners with virtually no income for reopening, financial experts are saying. For these business owners, often operating with slim margins even in good times, the battle to regain customers and profits is expected to be waged fiercely around the country. Many of them won't win.
In New York City, one-third of local small businesses — some 77,000 employers — will likely shutter before the pandemic clears, according to a study from the Partnership for New York City, a civic group representing the city's largest private-sector.
The Big Apple's small business sector has already lost 520,000 jobs, the Partnership's study said, and even more closures would disproportionately harm the city's Black and Hispanic communities, which were already lagging behind Whites before the coronavirus hit.
"Disparities in income, education and employment status meant Black and Hispanic residents held jobs most at risk in the pandemic," the study said.
A crumbling small business community concern's New York City's largest corporations and their leaders because big companies contract with smaller firms as suppliers or service providers. And their employees personally patronize small businesses that cater to their retail and entertainment needs.
"Most business leaders are confident that the city will remain a leading financial and commercial center, but it will be more difficult to attract and retain talent until people trust that the urban environment is healthy, secure and welcoming," the study concluded.
It's not just New York. In Minnesota, about 4 in 10 Black-owned businesses won't return in the Twin Cities, small business organizer Nancy Korsah told CBS MoneyWatch last month. The combination of repairing property damage from George Floyd protests and loss of income during the state coronavirus shutdown has become too much to overcome, Korsah said.
Nationwide, 7.5 million small companies are at risk of closing for good this summer, according to a Main Street America study. Losing that many businesses could further damage the U.S. economy because "these are the businesses that make up the bulk of jobs and are at the heart of communities across America," Main Street America researcher Michael Powe said in the study.
Looming closings in New York, Minnesota and elsewhere would come on top of the hundreds of thousands of small businesses that have already called it quits this year.
Harvard University economists said in a separate study that 100,000 small business have closed since March. Meanwhile, about 440,000 black-owned businesses shuttered between February and mid-April, according to a University of California at Santa Cruz study.
Small businesses have struggled and will contine to struggle during economic downturns because most of them have very little cash reserves stockpiled, experts said. That means small business owners do not have the money to pay rent, buy more inventory and rehire workers in time for returning customers.
In the Harvard study, 75% of the small business owners examined said they only have two months of cash for monthly expenses.
"These limited levels of cash on hand readily explain why layoffs and shutdowns have been so prevalent," said University of Illionis labor economist Alexander Bartik, who co-wrote the Harvard study. "These firms just do not have cash on hand to meet their regular expenses."