As states reopen, small business owners find themselves in a race against the clock to remain solvent.
Although economic conditions have gradually improved, it remains to be seen how America’s small businesses will be affected by an economy still restained by millions of weary consumers and social distancing guidelines. (CNBC)
As state shutdowns are lifted, the focus has turned to whether small to mid-sized businesses are strong enough to reopen and can find enough business to survive, preventing a wave of failures.
The concern about solvency was clearly on the mind of Fed Chairman Jerome Powell, when he testified before the Senate Banking Committee Tuesday on the fiscal and monetary programs aimed to help the economy. He reiterated a message he sent last week — that the Fed alone cannot prevent “avoidable insolvencies,” and that Congress needs to help. So far, there’s no agreement on a further stimulus bill in Congress.
There are already signs that businesses in the hardest hit industries — like restaurants and hotels — are falling behind and not paying their bills at an alarming rate.
“I think what Powell is saying is the solvency side, it has to come from the fiscal side of the equation. The statistics from small business in general show most small businesses operate on a tight cash flow timeline,” said Greg Faranello, head of U.S. rate strategy at AmeriVet Securities.