The Covid-19 crisis has had devastating effects on most small businesses. Aware of this fact, governments are coming up with special programs for small businesses. The programs are designed to help the small businesses survive the Covid-19 disruptions. Some of the specific ways in which governments are helping small businesses to cope with the Covid-19 disruptions include:
1. By giving them tax breaks
In some nations, the governments have opted to reduce the amounts of tax that small businesses have to pay, during the Covid-19 crisis period. For instance, you may find a jurisdiction where the small businesses used to pay 20% of their profits to the government as tax (during the normal times). Now due to Covid-19 disruptions, they are told to only pay 10%. Some governments seem to have actually given full tax forgiveness to small businesses. They have simply told small business owners that they won’t have to pay any tax during the Coronavirus pandemic period. And this is a big deal to the small businesses – which, in some parts of the world, have to spend as much as 30 percent (or even more) of their profits on taxes. Thus the businesses are able to use the saved tax money to keep going during the Covid-19 crisis period. There are some nations that are unable to forego the taxes they get from small businesses. Or even to reduce the amount of taxes small businesses pay. Some nations in that category have instead opted for tax deferrals. This is where the small business owners are told that, yes, they will still have to pay the normal amounts of taxes – only that the payments can be deferred. Some other nations have opted to identify the specific types of small business that have been hardest hit by the Covid-19 crisis. Then they have given tax breaks to those specific businesses. Under that scheme, the businesses that haven’t been particularly hard-hit by the Covid-19 crisis pay the normal taxes. But those that have been very hard hit are given some tax breaks.
2. By giving them grants and loans
Some governments have established special grants programs for small business owners. Those are schemes where small business owners can apply for grants to keep their enterprises going during the Covid-19 crisis period. In some nations, these grants are available to all small business owners who are interested. In some other nations, the grants are only available to small businesses that have been particularly hard-hit by the Covid-19 crisis. In some nations, the grants are supposed to go to specific uses. That is where, for instance, you find a government giving small businesses grants to be used to [only] pay their employees’ salaries during the Coronavirus crisis period. By doing this, the governments end up killing two birds with the same stone. Firstly, they help the small businesses to retain their employees, thus reducing unemployment. Secondly, they help the small businesses to keep on operating, which is important for the economy. Governments that are unable to give grants to their small businesses have instead opted to set up loan schemes. This is where the small business owners are told that they can apply for loans (at concessionary rates) to keep their businesses running during the Covid-19 crisis period. Again, in some nations, the concessionary loans have been made available to all businesses that are interested. In some other nations, the concessionary loans have been only made available to businesses that have been particularly hit hard by the Covid-19 crisis. The understanding in many nations is that the loan schemes are more ‘sustainable’ than the grants schemes. Hence the preference for the loans schemes. You see, grants are ‘free’ money — and there is only so much money that a government can give out for free. The money that is available to the government comes from the taxes people pay. And some individuals may be averse to the idea of their tax money being given out for free to small business owners… But where the money is given in the form of loans, it looks a bit fairer. However, the loan schemes are not without their own challenges. For instance, you find that many small business owners are hesitant to saddle themselves with more loans under the prevailing conditions. Thus, even where the loan programs are in place, the uptake has tended to be slower.
3. By protecting them from creditors
The effects of the Covid-19 crisis have made it impossible for certain businesses to keep up with their obligations to their creditors. Aware of this fact, many governments have come up with rules that protect the small business owners from being pushed too hard by the creditors. Some governments have encouraged banks to renegotiate loan terms with the small business owners. What would have happened in the absence of such protection? There would almost certainly have been the risk of many small businesses closing down and having their assets (whatever remains of them) auctioned off by the creditors. It is important to remember that the Covid-19 crisis has caused some small business’ revenues to drop by as much as 90%! This means that such businesses simply can’t keep up with their obligations to their creditors. Hence the need for government protection.
4. By protecting them from evictions
The disruptions brought about by the Covid-19 crisis have made it impossible for certain businesses to keep up with rent and mortgage payments. This subsequently means that they are at risk of being evicted from the premises they operate at. Aware of this fact, governments have come up with rules that protect the small business owners from being pushed too hard by the landlords or mortgage lenders. Some have actually gone to the extent of making it illegal for any evictions to be undertaken during the Covid-19 crisis period. Of course, the more sensible landlords also see that it is not in their best interests to evict the small businesses from the premises they are operating at. That is because the odds of them getting other tenants to take over those premises (during this Covid-19 crisis period) are slim. So they see that it is better to retain the small businesses already operating from there, their difficulties in paying rent notwithstanding. But not all landlords are capable of seeing this this way. That is why governments have had to come up with eviction/foreclosure moratoriums during this Coronavirus crisis period.