Even in a growing economy, most small businesses in the United States lack sufficient reserve capital to endure a prolonged business interruption, so a natural disaster, pandemic, or any condition that interrupts normal operations can quickly lead to job cuts and business failures. If the government wants to keep small businesses afloat, its support must be enacted quickly and generously and be easy to access, according to a survey of 5,800 small businesses conducted early during the COVID-19 outbreak in the US.

University of Illinois’s Alexander W. Bartik, Chicago Booth’s Marianne Bertrand, and Harvard’s Zoë Cullen, Edward Glaeser, Michael Luca, and Christopher Stanton have been studying small-business behaviors, decision-making, and attitudes. Their research provides a detailed look at the financial health of small businesses heading into COVID-19 and underscores the need for fast and easy-to-access government interventions when businesses are interrupted.

The researchers conducted their survey as the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in late March and implemented in April. By then, small-business owners, who employ 48 percent of American workers, had already cut their workforces massively, a sign of their precarious finances even ahead of the outbreak. Three quarters of survey respondents, who are all members of Alignable, a small-business network, reported they had cash on hand to cover expenses for no more than two months.

Survey respondents who believed the pandemic would last longer were more pessimistic about their companies’ chances of surviving. The researchers estimated that business closures could lead to almost 33 million job losses if the pandemic were to last four months, 35 million if it were to extend six months.

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One bright spot in the survey is that business owners said programs such as the CARES Act could help, and indicated they would take assistance to save jobs if it were available quickly enough. Business owners polled before details of the CARES Act were made public expected to cut 40 percent of their employees by year-end. After they learned about CARES, they expected only 6 percent cuts.

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Still, 28 percent of companies said they would not seek such help. While some of those owners said they didn’t need the money, about a fifth were concerned that the government would not forgive the debts, and a tenth of the owners worried that taking the aid would involve a bureaucratic tangle too gnarly to be worth the effort.

“These results suggest that clarity about the program and a streamlined process will be crucial if the government wants to ensure a high take-up rate,” the researchers write, though these conditions are difficult to achieve during times of panic, uncertainty, and fast action within a system of adversarial democracy.

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