The Negative Impact of Covid-19 on Small Businesses

The Juvenile Economist
2 min readOct 15, 2021


Small businesses with fewer than 500 employees account for 48% of all American jobs and 43.5% of the United States GDP. However, they are facing an existential threat in the wake of the coronavirus crisis. National lockdowns, economic downturns, and supply chain disruptions have ravaged small businesses across the world.

  1. Many small businesses have laid off workers or closed down

According to data from the Harvard Business Review, 45% of small businesses were temporarily closed due to Covid-19. Total employment by these businesses declined by 40% since the end of January 2020. In the mid-Atlantic region that surrounds New York City, more than 55% of small businesses had closed and employment had fallen by 44%. The Pacific region, with statewide closures in California and an early outbreak in Washington, has seen equally dramatic employment reductions.

2. Small businesses suffer from a liquidity crush

The majority of small businesses had less than two months of cash on hand or other liquid assets to manage shocks. The median business with monthly expenses over $10,000 generally didn’t have enough liquid assets to cover two weeks of their spending. Without a credit lifeline or cash infusion, businesses will have to either cut their spending drastically or close down.

3. Pessimism about reopening

Roughly 60% of small business owners expect to be able to reopen for business by the end of 2020. However, nearly 30% view it only as somewhat likely that they will be able to do so, and almost 10% find it unlikely or extremely unlikely that they will be able to commence business by year end.

Overall, these findings suggest a situation that is challenging, unpredictable and complex. Small business owners must plan out their business decisions and their costs and assess how consumer demand has shifted due to the pandemic. It is of vital importance for owners and managers of small businesses to act with prudence. It’s important to understand the broader landscape to successfully navigate the economic crises brought on by Covid-19.