“The nature of the economic recovery that follows the COVID-19 crisis will depend in part on the survival of small businesses,” the Fed said in its biannual monetary policy report to Congress on Friday. “The pandemic poses acute risks to the survival of many small businesses [whose] widespread failure would adversely alter the economic landscape of local communities and potentially slow the economic recovery and future labor productivity growth.”
Congress has extended some help, including $660 billion to cover payrolls and overhead. About three-quarters of small businesses with employees have applied for the aid, with many getting funding, the Fed said. Still, “some industries may face an ongoing need” after the program expires this summer.
Meanwhile, job losses have been steeper at small businesses than large ones, with many small firms stopping paychecks entirely, the Fed said. Some 30 percent to 40 percent of small firms in sectors most affected by social distancing have gone inactive since February.