Small businesses face ‘triple whammy’ and ‘everything has gotten worse’: Goldman Sachs director

Goldman Sachs National Director of 10,000 Small Businesses Voices Joe Wall joins Yahoo Finance Live to discuss the outlook for small businesses as they struggle with a surge in Omicron, inflationary pressures, supply chain disruptions, and labor shortages.

Video transcript

- All right, let's turn to our next guest. Small businesses are reeling from the effects of omicron, according to a new national survey released by Goldman Sachs' 10,000 Small Business Voices. Here with more data and details are Joe Wall, Goldman Sachs national director of 10,000 Small Business Voices, along with Yahoo Finance's Dani Romero. Thank you so much, both, for being here. I want to start by asking you, just from the data that you've seen, what are the most significant challenges that small businesses are facing? I know labor is a big concern.

JOE WALL: Yeah, so, you know, in addition to the omicron variant, which obviously has had a devastating impact for a lot of businesses over the last month or so, our data shows 71% of small businesses have seen a revenue decline as a result of the variant. About a third of them report having to close temporarily or scale back their operations. So that, in and of itself, has obviously had a tremendous impact on a lot of businesses.

In addition to that, we really see what effectively is a triple whammy of labor shortages, supply chain disruptions, and inflationary pressures. And if you look at our data back in September vis-a-vis today, what you see is that, across the board, everything has gotten worse. So over 80% of small businesses say inflationary pressures have increased since September.

Supply chain disruptions have grown. And when it comes to labor shortages, 87% of small businesses that are hiring are saying that they're having a tough time finding qualified candidates, and 97% are saying it's having a real impact on their bottom line. So if you take that in culmination, what we're seeing from our data is that our small business owners feel like more federal aid is necessary, just given the conditions right now.

DANI ROMERO: And Joe, it's Dani. Going off of that point, you know, like you said, you mentioned in the report about the importance of federal relief. If we don't see that, what are the impacts we're going to see for small business owners?

JOE WALL: So again, I want to preface, I don't-- I think if you talk to just about any small business owner, no one wants a handout. I think what is necessary right now is that there are some government loan programs, not grant programs, loan programs, that expired at the end of last year, notably the COVID EIDL loan program, which the Biden administration, to their credit, modified to make it much more flexible, and also increase the amount that you could take out from 500,000 to 2 million. So they pretty dramatically revamped it to get capital out the door in the third and fourth quarter of last year.

And you know, we hear from business owners that took advantage of those loans that, for many, it's saved their business. And unfortunately, that loan program came to a close. The reason that's so important is that, for many small businesses, if you look back at their 2020 financial statements or 2021, they simply are not going to qualify for a loan, or if they do, they're going to get an interest rate that's much higher than they otherwise would.

And what's nice about the COVID EIDL loan program is it doesn't take into account the pandemic impact. And so that's, I think, a good first step for Congress, just in terms of helping a lot of small businesses that are struggling right now as a result of the roller coaster over the last couple of months.

DANI ROMERO: Yeah, and Joe, another interesting point was that a third of operators say that they had actually more of a difficulty in 2021 than they did in 2020, even though a lot of them-- I mean, in 2020, they had to shut down completely. So why is that? What are the factors contributing to that?

JOE WALL: Well, I think a lot of it is the changing conditions. Like if we go back to June, things were looking very good. In fact, you know, when we asked business owners back in June, do you think the US is on the right direction or are we on the wrong track, 67%, 2/3, said things are headed in the right direction. It felt good. Masks were coming off. Mandates were being lifted.

And then today, if you look at that data point, it's 28%. So we've seen a dramatic drop in just confidence when it comes to just the operating environment right now. So I think it's a combination of factors. It's obviously the turbulence of COVID and not knowing what's coming next, and then it's the unusual economic conditions we're in right now. That is-- you know, I think a lot of small business owners just don't feel like they can catch a break.

- Yeah, speaking of which, Joe, when you-- I want to get back to the supply chain issues, because very often, it's a David and Goliath sort of situation, and these small businesses feel like the suppliers give priority to those larger businesses that sort of buy in bulk. So how optimistic are the small businesses you talk to about the supply chain issues easing anytime soon?

JOE WALL: So only 13% of small businesses that have been impacted by disruptions to their supply chain think that it's going to ease up in the next six months. So 13% think it'll ease up in the next six months. So not a lot of confidence in terms of that getting better anytime soon. And to your point, we asked a question along those lines. About 2/3 of businesses say that they have seen large operators in their space get priority over them because of their large volume orders. So small businesses feel like they're getting the short end of the supply chain crisis. But it's obviously bad across the board.

- OK, we will have to leave it there. Thank you so much for your time.