The State Of Main Street In 2020’s Second HalfAugust 5, 2020
The first half of 2020 was a tough time to run a small business on Main Street as stay-at-home orders closed down restaurants and retailers for much or all of the past five months. That left small and medium-sized businesses (SMBs) scrambling to rapidly switch to digital to keep at least some revenue coming in.
“That first 60 days of the shutdown was really that critical time when the small businesses in most of the markets had to make a quick pivot and move into this new digital environment if they weren’t already there,” Visa’s Kevin Phalen told Karen Webster in a recent conversation. “And they had to expand out their consumer base.”
That requirement of rapid change left many Main Street merchants deeply shaken and worried about their futures. Early on in the pandemic, more than half of those we surveyed (58.4 percent) told PYMNTS in our Main Street on Lockdown study that they were either unsure if their business would survive through the pandemic or were fairly certain it wouldn’t.
That seems pessimistic until one considers reports that one-third of New York City’s 240,000 small businesses will likely fail, taking roughly 500,000 jobs with them. Not surprisingly, commercial rents in the city’s most popular shopping districts have already started to plummet.
The SMB closures stem in many cases from a mounting cash-flow gap, according to a collaborative report by Visa and PYMNTS. Some 76 percent of merchants we studied reported suffering from at least occasional cash flow issues since the outbreak began. That includes nearly half of Main Street SMBs (49 percent) who reported cash-flow challenges “sometimes” or “frequently.” Of those, 83 percent attributed the problem in whole or in part to the pandemic.
As for how they’re navigating those shortfalls, 37 percent of SMB owners are tapping personal funds, while 26 percent are using personal credit cards. Many are also turning to the option of not paying out funds they should. Some 18 percent reported purposely delaying their supplier payments, while 20 percent are delaying payments to their employees.
But such solutions are only temporary stopgaps — and insufficient given that merchants expect the pandemic to depress their business for 222 days on average.
Unsurprising, the survey also demonstrated surging interest in real-time payments settlement. After all, SMBs often lack access to other funding sources to fill holes in their cash flow.
“One of the digital tools in which Main Street SMBs show great interest is real-time merchant fund settlement,” the PYMNT/Visa study found. “Nine out of 10 surveyed Main Street SMBs would consider using real-time settlement capabilities if available, and four out of 10 surveyed Main Street SMBs say they would be ‘very or ‘extremely interested’ in switching to point-of-sale (POS) providers or acquirers that offer that capability.”
As for why firms are interested in real-time…