There is little doubt in the minds of New Yorkers that COVID-19 has severely impacted the ability of small businesses to stay afloat.
Look no further than to how COVID has decimated New York City’s hospitality industry, where almost 90 percent of restaurants and bars have been unable to fully pay their rent. However, the impact is much deeper than just one industry. The state’s prolonged shutdown has equally hurt downstate New York. This region has seen record setting job losses, and bankruptcy filings as many small business profits have all but dried up.
Even as 644,871 loans totaling $55.6 billion in federal emergency loans went to New York businesses owners, it has not been enough to cover the many months of revenue losses during the shutdown and its subsequent aftermath. The net result has been thousands of business closures and counting. While the country waits for a long-term economic solution, our state can be of assistance in supporting those businesses that are struggling due to no fault to their own.
Worst Quarter for Bankruptcies in History
There has been a 40% increase in bankruptcy filings in the Southern and Eastern districts of New York compared to 2019. Bloomberg has reported that over 6,000 New York businesses have closed from March 1 – September 11, (4,000 of which were permanent closures). Moreover, the pandemic could permanently close as many as a third of New York City’s 230,000 small businesses, according to the Partnership for New York City.
Nationally, despite the recent slowdown in filings by companies with more than $50 million in liabilities, this is the worst ever third quarter for bankruptcies, according to data compiled by Bloomberg.
Bloomberg has referred to this as a “September Surge,” as seen in the image below.
Many bankruptcies are being fueled by the inability of small businesses to secure loans. Loans are elusive for many because they are operating at limited capacity and revenues are a fraction of where they were pre-pandemic. Conversely, the Treasury Department has helped large U.S. companies (e.g., banks and airlines) with an abundance of liquidity designed to maintain their businesses long-term. Main Street has been largely shut out of long-term loan options, leaving them more exposed to bankruptcy as government support programs expired with little progress on fresh stimulus in Congress.
New York Received the 3rd Largest Amount of Federal Business Loans
New York was one of the hardest hit states in the union during this pandemic. As the state’s economy limps along, hundreds of thousands of New York businesses applied for and received the third highest amount of federal pandemic loans in the nation.
The U.S. Small Business Administration (“SBA”) reported that they had approved 5,212,128 in Paycheck Protection Program (“PPP”) loans around the country for a total of $525,012,201,124 loan dollars.  The average loan was $100,729 and there were 5,460 participating lenders. The U.S. Chamber of Commerce found that one in five small businesses had applied for a PPP loan.
In New York, businesses received a total of 348,870 loans for a net dollar amount of $38,699,947,686. This is the third largest amount in the country, behind only California ($68,644,418,670) and Texas ($41,326,454,268).
Economic Injury Disaster Loans
As of mid-August, the SBA had approved 3,573,856 Economic Injury Disaster Loans (“EIDL”) for a total sum of $188,022,021,024. In New York State, 296,001 of these loans were approved for a total of $16,912,119,267. This is the third largest dollar amount in the country, behind only California ($33,572,280,259) and Florida ($19,530,926,976).
NY Small Business Revitalization Loan Fund
During the Great Recession, economic developers had to pivot from expansion led incentive programs and focus more on how to keep businesses afloat. COVID-19 has the potential inflict a massive blow to New York businesses if left unchecked. While most of the lucrative programs are focused on manufacturing, distribution, etc. In order to save our economy we must pivot to protect main street and help the small mom and pop retailers and service providers.
There are tens of millions in unused economic development funds that could be purposed into long-term capital loans for qualified small businesses. Currently, there is approximately $70 million available in the Job Development Authority that supplies direct loans to business. This program could be repurposed to support the aforementioned companies. Moreover, there are tens of millions in the Empire State Development coffers that have not been expended and could also help to boost a Small Business Revitalization Loan program.
Our state is at a crossroads and we need to put our ideologies aside and our pointer fingers down. We are New Yorkers and there is no one better at multitasking then us. We can fight this pandemic and rebuild our economy at the same time.
The full effects of the state’s economic problems have not yet been realized, but will be very soon if we do not become proactive.
Copyright © 2020 empire government strategies. All rights reserved.