More than 3 million companies shut down during 2020’s springtime, as COVID closures swept the nation. Last year, The Hamilton Project, a division of the Brookings Institution, estimated that 400,000 enterprises would run out of business for good by June 2020.
More current estimates by the Us Federal Reserve found over 200,000 firms with workers onboarded between March 2020 and February 2021–a figure that’s 25-33 percent higher than the national average.
And small businesses are at their worst. Since the government Paycheck Protection Program (PPP) expired in May and entrepreneurs are still dealing with late credit debts, postponed rent, and other expenditures, the ultimate total of business fatalities might go higher.
Closures of this magnitude have wreaked havoc on company owners, personnel, and communities. But on the flipside, COVID-19 seems to have opened doors for new startups to flourish. According to a University of Maryland research, applications for new firms spiked in the second half of 2020 to the greatest levels in the 17 years of tracking such data. Throughout 2021, the rate has remained high.
This development may appear to be the result of laid-off or dissatisfied workers seeking self-employment. However, according to John Haltiwanger, an economist at the University of Maryland, the increase in businesses that are likely to hire workers—which require more manpower to establish their bottom-line than one-person businesses—is likely “fueled by changes in the business environment” caused by the pandemic.
Non-store retailers, for example, accounted for a third of the growth in new business apps, indicating that the transition to remote interactions between businesses and customers is taking its toll. To put it another way, COVID-19, for all its devastation, is also fueling innovation.
“Startup companies are key in restructuring,” Haltiwanger argues, before adding an interesting point. “However we’re not sure just how much of these will survive and thrive.”
Although there is a lot of uncertainty, startup companies are known to try things out. There’s a wealth of evidence suggesting they’re better capable of substantial innovations—not just technological advancements, but reshaping their business models.”
Author BioMichael Hollis is a Detroit native who has helped hundreds of business owners with their cash advance solutions. He’s experimented with various occupations: computer programming, dog-training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.