The current economic climate is one of massive systemic financial crisis. Major economies including Brazil, Canada, Italy, the United States, France, and the United Kingdom have all seen an increase in unemployment in 2020 from 2019. The International Monetary Fund estimates the global economy shrank by 4.4% in 2020. In this circumstance, business owners and employees don’t know if, or when, conditions will return to normal, and therefore planning forecasts and budgets can’t be built on only historical trends and metrics.

In a December 2020 presentation to the IMA® Small Business Committee, Carl Weinberg, founder and chief economist of High Frequency Economics, compared these dramatic effects of the pandemic on economies around the globe to the post-financial crisis period of 2008-2009. Those economic conditions required a recovery period of one to five years.

Weinberg suggested that this pandemic, however, is more widespread. It’s affecting a broader range of industries and geographic regions, and it has broken aspects of our economies that will have long-term effects that won’t be resolved even after widespread vaccination.

In December, with the rate of COVID-19 infections still rising in 60 countries, many of the world’s strongest economies, including the U.K., Germany, and highly populated areas of the U.S., reinitiated shutdowns and tightened restrictions.

As of March 10, 2021, the U.S. had experienced 29.2 million active cases of COVID-19 and 526,213 coronavirus-related deaths. Worldwide, the total number of cases was more than 118 million, with numbers still increasing. Among the consequences has been a dramatic reduction in available workforce.


Weinberg suggested that a restructuring, in some form, is necessary for recovery. This is a global challenge, as businesses won’t spring back without thoughtful economic policy. Governments need to develop new financial instruments to support this restructuring.

Restructuring, Weinberg said, with a focus on business, particularly small business, is an effective and efficient avenue to restoring healthy economies. The stimulus programs of previous eras illustrate that funds don’t necessarily trickle down to facilitate new businesses, and it may be unlikely for them to be effective for post-pandemic innovation and rebuilding. In a slowed-down economy, there’s a risk that businesses may not be able to meet financial commitments, creating an avalanche effect of wider economic failure similar to the Latin American debt crisis of the 1980s.

Likewise, according to Weinberg, other forms of government support are limited. For example, tax policy only helps individuals and companies that pay taxes; it doesn’t necessarily help those with cash flow emergencies to build businesses. Given these scenarios, in Weinberg’s view, the focus should be on finding and innovating around the businesses that show potential for success in 15 or 20 years. In this scenario, the government finances small businesses to rebuild and regain employment and to avoid the long-term problems associated with unemployment and the government budget strain that would result from paying unemployment claims for a longer period of time. This form of government funding would allow businesses to service debt and to avoid high default rates on loans, which, if left unsupported, would cripple the banking industry.


Cutbacks and closures of restaurants and retail businesses will begin to ripple through other industries, such as real estate and equipment manufacturing. This creates risks to banks that lend against these long-term assets, leading to potentially higher interest rates to borrowers. Government programs similar to the U.S. Small Business Administration (SBA) could be part of the solution by offering guarantees or other assurances to ensure that viable, promising businesses continue to grow and could simultaneously offset some of the extra lending risks (reflected in interest rates).

To achieve this, businesses that apply for loans and grants under a government funding program should be required to submit a business plan to substantiate the viability of the business to prevent funds from being used to maintain obsolete and unsuccessful businesses only long enough to spend the funds without contributing to the growth of the economy.

Top industries to support include local hospitality, goods, and services businesses and other small businesses that have been hit the hardest and that lack the strong financial support of larger entities (like public, equity investment, or private multinationals). A microlending approach to reconstruction that considers innovation to restart viable businesses may be more effective than traditional government-supported programs and could also help alleviate risks.

The restructuring of financial loans across businesses is just one element of recovery. Moving forward with this approach will require that small-business finance and accounting professionals apply their expertise. It will be necessary to reorganize how small business professionals use their skills.

Finance professionals need to remain agile during this time while focusing on new technology-driven insights. Professionals should make a few key strategic moves: drive digital strategy initiatives, focus on value-adding technologies, prioritize closing the skills gap, maintain a skilled finance team, and develop a data-driven decision culture (see “Managing Digital Transformation” by Frank Verbeeten and Jan Heinen).


What can small businesses do now to set themselves up to thrive, and not just survive, in 2021? The SBA suggests these key trends may be worth incorporating into your business plan. First, prioritize e-commerce. Early data shows e-commerce grew more than 20% in 2020, and a report from IBM shows the pandemic accelerated the shift from physical retail to online retail by about five years. Ensure customers have a seamless experience on your site and offer mobile options.

Second, customers continue to demand alternative payment and purchase options, like touchless payment and curbside pickup. The National Retail Federation found that no-touch payments increased 69% from January 2020 through December 2020.

Third, invest in remote work. A survey from Intermedia suggests 57% of small and medium-sized businesses will continue to offer remote work options through 2021, and a survey from GGV Capital indicates that 54% of small business owners spent more on technology in 2020 than 2019.

Finally, businesses that offer virtual services are well positioned to grow in 2021. Certain business types like virtual health and fitness, cybersecurity, grocery delivery, and telemedicine have seen rapid increases in demand that are expected to continue.

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