More than 18 months into the pandemic, bakery owner Letha Pugh is so low on cash that she’s afraid to spend it on anything other than paying her employees.
She’s hardly alone: 44% of U.S. small businesses have less than three months of cash reserves, leaving them vulnerable to another shutdown due to COVID-19 or other financial emergencies, according a Goldman Sachs survey of more than 1,100 small businesses. An even greater share — 51% — of Black-owned small businesses have less than three months’ cash on hand, according to the same survey.
The results underscore the ongoing pressure on many small employers around the country despite a rebound in customers thanks to the availability of COVID-19 vaccines.
Pugh is Black and said that many small businesses, like Bake Me Happy in Columbus, Ohio, are still struggling. According to CBS MoneyWatch, even though she desperately needs a van for delivery, the cash crunch is making that impossible.
” I would prefer to pay my employees than purchase a van. This is what everyone seems to be thinking right now. She said that it was difficult for small businesses.
“Everything is up in the air”
Pugh also worries that the latest COVID-19 wave could again shut down her business.
” “Everything’s up in the air,” she stated. She said, “The money that I have in cash, I am afraid of using it for any purpose.” It’s like the time when everybody in the bakery was vaccinated. We were excited, took off our masks and then two weeks later everyone had to put them back on.
Despite strong economic growth this year, Goldman’s findings highlight the rocky recovery for many Americans, while also pointing to the added challenges facing many minority business owners during the pandemic.
“There has been a really uneven recovery for Black business owners,” Joe Wall, national director of Goldman Sachs’ “10,000 Small Businesses Voices” survey, told CBS MoneyWatch. “We have consistently seen that Black business owners have lagged over the past 16-17 months vis-a-vis the overall population. “
Too much debt
While federal loan programs were crucial in keeping many small businesses afloat until COVID-19 restrictions were eased, some owners are concerned by the level of debt they’ve taken on. According to Goldman, 41% of small business owners, and 55% of Black-owned businesses, say the new debt could undermine their financial stability. While Bake Me Happy’s financial situation is better than last year, Bake Me Happy had to take on substantial debt in order to survive. Pugh received a federal Paycheck Protection Program loan, which was forgiven. She was also awarded a $100,000 Economic Injury Disaster Loan, which served as a “safety net” that she will have to pay back with low interest over 30 years. Pugh stated that she had to cancel her plans to buy the bakery’s buildings.
Also troubling, only 31% of small businesses say they could access funding if they needed additional capital. Even fewer Black-owned businesses — just 20% — report confidence in their ability to raise money.
” For us and the other small-business owners, there would be a boost in federal support that was directed to local governments with relationships with small business. “I think people wouldn’t feel as isolated and alone with this.