Definition of small businesses
Small businesses are also referred to as Small Medium Enterprises (SME). They are the driving force of national and global economies. Small businesses encourage innovation, financial independence and create employment.
Impact of COVID-19 on small business
The small businesses were the most affected, which caused the recession of the global economy. COVID-19 had severe negative social-economic implications for businesses, small business owners, and society. Implications included unemployment, a decline in business, closures, debts, and psychological suffering.
Mechanisms to support small business
With the emergence of the Coronavirus epidemic, the following ways can support small business
Adoption of technology
Entrepreneurs and relevant players in this sector should incorporate technology into their operations.
Many small businesses opted to carry on their operations during lockdowns and curfews online. Many small businesses could stay afloat during the pandemic due to the internet.
Crisis Management plan
COVID-19 epidemic widely impacted small businesses because they lack comprehensive crisis management. Small businesses are often the starting points for future companies and corporates. Small business owners should adopt long-term and adoptive crisis management strategies to withstand any shocks such as disasters and epidemics
Fiscal stimulus programs
Governments can use cash stimulus to curb the economic effects during periods of recession, such as during the COVID-19 epidemic. These cash stimuli can balance and mitigate the impact of falling demand or decreased cash flow in an economy. Relevant government sectors should ensure that the economy’s cash flow system can function efficiently during periods of recession. The government cash stimulus program, will indirectly support businesses and their employees.
The Paycheck Protection program (PPP) in America remains a leading example of government fiscal stimulus during the Coronavirus epidemic
Limited access to credit from financial lending institutions is one of the challenges that small businesses face. The repayment plan offered by the lending institutions is also unfriendly to the small business owners.
Governments funded loans can help and cushion small businesses in disasters, recession, or epidemics. The establishment of government loans with favorable repayment schedule will also ensure the national economy do not encounter drastic drops in times of disasters or epidemics like during the COVID-19.
In America, Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted after the Lockdown. The Paycheck Protection program (PPP) was initiated after the enactment of CARES. PPP aimed at supporting small businesses through loans. The PPP loans had a term of five years; interest was 1% and had zero collateral provision. Also, a vital feature of the PPP was that, under certain conditions, the loans would be forgiven entirely.
Loan payment deferral policies
At the start of the Coronavirus epidemic, many small businesses had outstanding loans from banks. Most small businesses could risk being closed, becoming bankrupt, suffering losses, default loan repayments, and accruing debts.
The Government, with relevant stakeholders, can formulate loan payments deferral policies in times of economic recessions, such as during the COVID-19 epidemic. Loan deferral policies will ensure that small businesses do not face penalties for defaulting their loan repayment due to epidemic.
Provision of social insurance
The Coronavirus epidemic provided insurance firms and small business owners an opportunity to understand the importance of insurance covers. Epidemic and disasters insurance covers help to cushion small businesses in such times.
Contain and suppress epidemic
Suppressing the virus remains the critical solution towards supporting small businesses. Government disaster preparedness helps to contain epidemics during early phases.
Improved testing, vaccination, mask use, social distancing, and contact tracing are ways of containing the virus.