Small businesses cut jobs while waiting for government loans

ADP report: Small businesses slash 11 million jobs in April

By Joyce M. Rosenberg
AP Business Writer

NEW YORK (AP) — While thousands of small businesses waited for coronavirus relief money to arrive, they were shutting down and laying off workers.

Two reports issued this week shed light on the crisis that business owners have been struggling through since the coronavirus hit. On Wednesday, payroll provider ADP said its small business customers slashed more than 11 million jobs in April as they were forced to close or suffered steep revenue losses amid the virus outbreak.

And nearly 30% of businesses questioned for a U.S. Chamber of Commerce-MetLife report said they had closed during April, a statistic that helps explain the big drop in payrolls last month. The survey was taken from April 21-27 and questioned 500 companies.

Nearly a third of the businesses surveyed said they applied or tried to apply for loans under the government's Paycheck Protection Program, and just 9% had received loan money. Only 48% said they were comfortable with their cash flow — a critical factor in businesses being able to operate. That was down from 80% before the virus hit.

The survey was taken largely during the period when loan approvals were on hold because the first $349 billion round of funding had been exhausted on April 16. Thousands of applications sat at banks while Congress debated and eventually approved a $310 billion extension, and approvals resumed on April 27.

As of late Tuesday, the Small Business Administration had approved nearly 2.4 million loans totaling $181 billion in the second round of funding. In the first round, it approved 1.7 million loans. The higher number of loans indicates that smaller loans being sought by smaller companies are being approved.

The numbers from both the ADP and Chamber/MetLife reports reflect the social distancing restrictions state and local governments began implementing in mid to late March, which forced the closure of many small businesses including stores, restaurants, gyms and sports and entertainment venues. But officials in many areas have begun relaxing those restrictions, which may lead to a reversal of some of the job losses.

However, even companies that remained open have been losing business as customers stayed home or cut back their spending. While companies that cater to consumers have been hard hit, businesses that serve other businesses also have seen their revenue drop.

The ADP report counts jobs lost at the payroll provider's business customers with under 500 workers. The smallest companies, those with fewer than 20 workers, cut nearly 3.4 million jobs and those with 20 to 49 employees cut 2.6 million.

The Labor Department has reported that more than 30 million people have sought unemployment benefits since the virus hit.

April's losses reported by ADP surpassed the 170,000 jobs cut in March. By comparison, companies added more than 31,000 jobs on average each month during 2019.

ADP also tallied more than 20 million jobs lost at all its business customers in April. The Labor Department's April jobs report on Friday will also show the extent of the overall damage to the economy from the virus outbreak.