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How Will St. Louis' Small Business Sector Look Once Things Reopen?

St. Louis-area businesses remain closed as the coronavirus pandemic drags on. Weeks of reduced income, or none at all, has stretched small businesses thin.
Nat Thomas | St. Louis Public Radio
St. Louis-area businesses remain closed as the coronavirus pandemic drags on. Weeks of reduced income, or none at all, has stretched small businesses thin.

As the economic toll of the coronavirus pandemic worsens, small businesses throughout the region — and across the country — are struggling to stay afloat. Some have been out of business for weeks, while others have scraped by on reduced revenue. 

While Missouri lifted its statewide stay-at-home order this week, St. Louis regional leaders won't start reopening the local economy until May 18.

Jerome Katz, head professor of entrepreneurship at St. Louis University’s Chaifetz School of Business, said the small business landscape will look much different when things reopen. 

“It's going to be a tougher world for small businesses in general,” he said. 

St. Louis Public Radio’s Corinne Ruff spoke with Katz about the outlook for small businesses in the region.

This interview was edited and condensed for clarity.

Corinne Ruff: How are small businesses in St. Louis holding up?

Jerome Katz: Every week that we remain in closedown, it's harder and harder for small businesses to survive because they still have a lot of their fixed costs — things like rent, car payments, benefits. Every small business I work with has dug into their cash reserves, their savings, to make ends meet and keep the businesses going.

Taken outside of the SLU Chaifetz School of Business on 04-30-20
Credit Corinne Ruff | St. Louis Public Radio
Jerome Katz, head professor of entrepreneurship at St. Louis University's Chaifetz School of Business, said it's a tough road ahead for St. Louis' small businesses.

Ruff: Will the federal government’s Small Business Administration loans be enough to stabilize St. Louis businesses?

Katz: So the money from the federal government will help, but it'll get used up really quickly again, and it's not going to be enough to keep us going for another more than a couple more weeks. 

Ruff: How do you think some of those problems with the way that this federal loan program panned out have impacted businesses in St. Louis, from what you’ve heard talking to these companies?

Katz: Shake Shack, bless their hearts, did very publicly give their money back. But you know, how did they get it? They said, well, no location has more than 50 people. The banks weren’t incentivized in any way shape or form to look at who was getting the money. And so the natural thing for them is to look at their best customers and say, 'Here is something you would qualify for.'

Ruff: There are some small, local programsthat have been set up to sort of tide companies over until they can get that federal funding — but as you mention, that federal money is going very fast and not always to businesses that are truly small or truly in need. And I’m wondering, will who gets one of those loans separate who will and won't survive?

Katz: Well, it certainly will for some businesses. We’re going to have changes in the small business landscape because even with the money, as restrictions are loosened up, the new ways to do business in the post-pandemic period is going to be really difficult. The amount of sales you can do is going to be a fraction of what it was before. 

Having cash flow is always a good thing, don’t get me wrong, but can you get enough cash flow under the restrictions to keep the business going until we’re far enough away from the pandemic that we can resume what passed for normal life before the pandemic? At that point, then the old numbers for your business have a better chance of coming back to life. Until then, it’s basically a belt-tightening time for all businesses.

Ruff: So right now, many businesses are closed because of these local stay-at-home orders, but when things start to open back up, how different will the small business sector look?

Katz: It depends how long the tail is for COVID-19. If it’s a short tail, we could be back to the new normal in four to six months. If it’s a really long tail, then we’re going to have social distancing, we're going to have reduced access for the foreseeable future. It's going to be a tougher world for small businesses in general.

Ruff: How many businesses won’t be reopening at all? 

Katz: I suspect we’re going to see closures across the range of businesses. The ones that started out financially in tougher circumstances are more likely to face failure. Which means in St. Louis that the communities that lose businesses the most will probably be the poorest communities — which is exactly the wrong thing to have happen. If you don’t have easy transportation to other parts of the city, losing businesses in your neighborhood is a real blow. 

Ruff: St. Louis is really lucky to have a very vibrant small business sector. Will that be washed away or fundamentally changed in some way by this pandemic?

Katz: It will not be washed away. It'll be changed by the mix of businesses. That said, if the smallest small businesses go away, they will be replaced. If a community loses their only convenience store because that owner ran out of money, people are going to realize there was a convenience store, there was a market; “I’ll start a convenience store again.” So it will rise again, no question about it.

Follow Corinne on Twitter:@corinnesusan

Send questions and comments about this story to feedback@stlpublicradio.org

Corinne is the economic development reporter at St. Louis Public Radio.