Business Loans In New York: All-Inclusive Overview Of Your Options

Being the financial heartbeat of the US, New York is an important state for the national economy. Given that NYC is made up of 98% SMEs, New York City business loans have been in high demand during the pandemic.

Being the financial heartbeat of the US, New York is an important state for the national economy. Given that NYC is made up of 98% SMEs, New York City business loans have been in high demand during the pandemic.

We may not have yet had enough time to know the full extent of COVID-19’s impact on business, but we do know that it’s been disastrous. Even prior to the pandemic, we could see that SMEs were struggling in the city, with fewer boutiques and sole trader stores in the highstreet.

Storefronts in NYC had a history of being occupied by small, local merchants, but are instead today being taken over by national chains; Pret a Manger, Starbucks, and many of these large companies can more easily afford the high rents.

As we can see in the 2020 Annual Report on the State of Small Businesses, there were 610,681 small firms operating in NYC in 2019. Whilst this number has grown, the share of all employment has dropped from 55% to 53%. In other words, large firms are outgrowing them.

COVID-19’s impact on New York SMEs

The employment figures worsen as we head into 2020. Unemployment rates within New York were the same as the national average at 3.8% in May 2019. 12 months later, this figure rose nationally to 13.3%, but to 14.2% in New York State, and to an astronomical 18.2% in NYC.

Despite the financial support from the government, there were many redundancies and SMEs going out of business. Generally, larger firms were at less risk during COVID-19 because of a few reasons. Firstly, they tend to have more cash reserves, and more assets to help secure loans. Secondly, many of the lockdown measures disproportionately hit SMEs. For example, many of the most essential stores – such as supermarkets – are dominated by large firms that weren’t forced to close, and didn’t experience a drop in demand. However, a small, family-run beauty salon saw no such luck.

One example of this, as detailed in the New York Times, was a Caribbean restaurant in Brooklyn called Glady’s. In March 2020, the restaurant was turning over $35,000 a week in revenue, but was completely out of business by August.

Despite large firms increasingly taking over storefronts on the highstreet, New York is still known for its brave world of quaint, independent stores. Around 3,000 businesses in NYC had permanently closed in those five months, which was more than in any other city in the US. Manhattan SMEs accounted for around half of these. A report by the NYC Hospitality Alliance found at one point, a staggering 92% of restaurants couldn’t pay rent.

It wasn’t just the lack of demand from social distancing measures, but also the loss of demand from wealthy New Yorkers leaving the state to stay in their second homes. Generally, these were more rural second homes in which they felt safer from the virus. This was quite heavily the case in the UK too, in which vast numbers of Londoners headed to their Cornish second homes, causing uproar in the region. Of course, they leave with their money and spending habits, too. 

The local spike in unemployment – whilst slowly recovering – also led to a drop in demand at small, local businesses. This vicious cycle would have normally led to a nation-wide long-term collapse, but fiscal support from the government helped prevent this. But did they do enough?

What support did New York SMEs receive?

The main source of support, which most became very aware of, was the Paycheck Protection Program. This program, which was nation-wide and around $1 trillion in value, helped SMEs by allowing them to apply for low-interest loans with private lenders (a maximum loan of roughly 2.5x the company’s average payroll cost). The loans were to be partially/fully forgiven if the business did not cut its payroll.

However, these PPP loans have been criticized to help large firms who weren’t at risk of going under more than they did small firms. In fact, whilst it’s difficult to measure, the NY Times claims it didn’t save many jobs and other programs would have been much more efficient.

Other state-specific programs were available, such as the Business Pandemic Recovery Initiative, which was around $800 million for SMEs. This was perhaps the largest non-federal grant, though some more modest alternatives were also up for grabs.

Have New York SMEs recovered?

First and foremost, the sad reality is there have been thousands of NY small firms that have permanently shut down and are not coming back. However, it’s important to note that there is economic recovery as things start to get somewhat back to normal. 

Getting back to “normal” starts with how we feel and behave. This precedes economic recovery. Fortunately, we can see that New York is very much open right now, and whilst it may not be as tourist-laden and bustling as usual, it’s on its way back to normality. 

Because of this, the economy is recovering. Bars and restaurants are open, and people are starting to move back into their NYC homes. BofA Research suggests card spending is up 38% in the NYC metro area compared to last year, whilst the US has finally established a way in which they can receive European tourists this summer. 

This tool by Investopedia is a great visualization of New York City’s recovery, suggesting that restaurant reservations are steadily rising, along with subway mobility and home sales. Unemployment is still way up compared to usual, but this is also declining, which paints a picture of a full recovery within a few years. 

Of course, the extent of the full recovery will be dependent on if there are any severe mutations of the COVID-19 variants and the effectiveness of the current vaccine roll out. Whilst NYC doesn’t rely on tourism, tourism also must fit in somewhere in the road to recovery.

SMEs are still needing business loans

Whilst we can get excited about having a successfully normal night out in the city, New York small businesses are still in need of finance. Being behind on rent, and having paid a lot more wages than having received in PPP funds, has meant that a lot of SMEs are still in a very fragile state.

Many will have survived only because of New York small business loans. Whilst banks have very little interest in lending SMEs at the best of times, let alone during the pandemic, many have turned to online lenders for help. 

Such online lenders are useful for struggling small firms because they’re far more tolerant when it comes to approvals and criteria. Generally, average credit scores will suffice, as long as there’s evidence of regular revenue and an ability to make repayments.

The automaticity of the application process from the lenders has meant that applications are approved within days, if not hours. This is a far cry from the 4-to-8 week application process that most bank loans have. 

For a struggling SME in the expensive city of New York, the immediacy and accessibility of these loans is a game-changer. Knowing that we can apply and stand a good chance of approval can mean taking more bold, positive decisions such as diversifying operations to become more covid-friendly (i.e. offering take-out as a restaurant), along with keeping hold of valuable staff members.

All in all, we will likely see debt rise among not just New York small businesses, but also the US as a whole. Even though the fiscal stimulus programs have been criticized, there’s no denying how expensive they were and how debt was used to fund it. Back in March, Biden signed a Covid-19 relief bill worth $1.86 trillion. 

With a risk of going off-topic, Biden has also signed a $3 trillion infrastructure and climate change proposal too. This isn’t to say this is wrong or reckless, but we will begin to see the topic of debt become increasingly talked about over the next few years, particularly with the over-leveraging of companies during the pandemic. 

Whilst the potential repercussions of this are a scary thought, we can only take one step at a time. And that first step is SMEs in cities like New York getting back on their feet, offering the public goods and services as if nothing ever happened…


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