The Economic Impact on Small Businesses During the Coronavirus Pandemic

The detrimental effect of the COVID-19 pandemic can never be emphasized enough. Not only did the global pandemic destroy the state of public health, but also the economic and social life has been severely affected. The onset of this pandemic set countries into a state of turmoil, and the United States was one of the countries severely affected by the COVID-19 pandemic. Public health in the United States plummeted severely, and unfortunately, the reaction to the pandemic was subpar, leading to the loss of many lives across the U.S. As a result, social life was altered to cope with the COVID-19 with restrictions such as social distancing and curfews. This pandemic did not spare the economic state in the United States as mundane business operations were not possible amid the crisis. The government ordered the closure of some hospitality-based businesses, such as bars and restaurants (Engidaw, 2022). Doing so rigorously affected the performance of small and medium enterprises.

Small and medium enterprises are many across the United States, which means that they contribute significantly to the economic performance of the U.S. Moreover, small enterprises are a source of livelihood for many people in the U.S.; hence, it directly impacts the country’s per capita income (Fairlie, 2020). Therefore, this research publication seeks to provide statistical analysis about the economic impact that the pandemic has made in the United States by focusing on small businesses in the country.

The first reason why small businesses were negatively affected in the United States was caused by the restrictions imposed by the government. The national government-imposed travel restrictions on the United States to curb the further spread of the pandemic. Social contact was the fastest way the COVID-19 sickness spread, and hence all social gatherings were banned. Traveling across states was restricted, and people were forced to stay safe in their homes and only to get out when it was extremely necessary. Unfortunately, most small businesses rely on daily sales to remain afloat (Engidaw, 2022). Therefore, the disruption that the COVID-19 pandemic imposed led to the closure of small businesses, which lacked sufficient resources to remain afloat.

Secondly, a significant section of the population in the United States did not have enough savings to cope with the effects of the crisis presented by the COVID-19 pandemic. Furthermore, many people across the United States were unsure that they would retain their livelihoods because a high level of uncertainty characterized the pandemic. As a result, such people were coerced to cope with dire circumstances by reducing their expenditure and spending only on necessities. According to O’Donnell (2020), the consumption of retail products reduced with a rate of 8.7% between February and March 2020. The reduction of consumer expenditure directly affected the performance of small businesses by limiting the amount of revenue that these enterprises were able to generate.

Thirdly, the COVID-19 pandemic was a strange phenomenon that many people prepared were not prepared for, and this made it intricate for people to cope with its presence. Consequently, the normal business operations of many businesses were interrupted in diverse ways. Excellent examples of intricacies that affected small businesses were the supply chain’s disruption caused by demand and supply shocks (Bartik et al., 2020). Demand and supply shocks are unprecedented and temporary. Consumers preferred some products more than others which automatically meant that business enterprises had to invest in the products demanded at the time. Unfortunately, small business enterprises often lack the luxury to make sudden investments because of the scarcity of resources. A research paper by (Bartik et al., 2020) collected data from small enterprises in multiple states across the United States, and the results show that many small business entrepreneurs had a negative financial fragility.

Financial fragility refers to the amount of operating capital that an organization can use to facilitate daily operations without requiring any external aid. The researchers of this article asked the research participants about the amount of money they had saved to maintain daily operations without borrowing loans or laying off employees. The results showed that twenty-five percent of the research participants barely had enough money to last a single month. Half the population of the research participants stated that they had accumulated money that would last them for around two months (Bartik et al., 2020). These results show that most small businesses in the United States could not cope with the pandemic because of financial constraints.

Based on data collected from various resources, it is apparent that small and medium enterprises in the United States were negatively affected by the pandemic. These businesses could not cope with the pandemic because of diverse issues, but the main one is the lack of sufficient capital to sustain the challenges that emerged. From a wider perspective, the economic condition of the United States was negatively affected because small and medium businesses contribute a considerable level of the country’s government revenue.


Bartik, A. W., Bertrand, M., Cullen, Z., Glaeser, E. L., Luca, M., & Stanton, C. (2020). The impact of COVID-19 on small business outcomes and expectations. Proceedings of the National Academy of Sciences, 117(30), 17656–17666. Web.

Engidaw, A. E. (2022). Small businesses and their challenges during COVID-19 pandemic in developing countries: In the case of Ethiopia. Journal of Innovation and Entrepreneurship, 11(1), 1. Web.

Fairlie, R. (2020). The impact of COVID‐19 on small business owners: Evidence from the first 3 months after widespread social‐distancing restrictions. Journal of Economics & Management Strategy, 10.1111/jems.12400. Web.

O’Donnell, L. B., Kristen E. Broady, Wendy Edelberg, and Jimmy. (2020). Ten facts about COVID-19 and the U.S. economy. Brookings. Web.

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