- Uptick in new business applications reflects a boost in entrepreneurial ventures during the COVID-19 pandemic
- Established businesses more likely to struggle, with some new ventures launched out of necessity after layoffs
- Economic downturns have historically offered opportunities for new business growth
Countless small businesses have been struggling to stay open during the COVID-19 pandemic, which has persisted for the better part of the year. Despite the challenges faced by established companies, entrepreneurs are undaunted and are finding it an advantageous time to start a business.
The trends reflect a paradox which has historically held true during economic downturns. These circumstances are harmful to existing businesses and might theoretically deter people from starting a venture in an uncertain climate. Instead, they are more likely to push forward and take advantage of favorable circumstances such as less competition, new customer needs, lower interest rates, and better deals in areas such as equipment purchases.
In the current downturn, small businesses have been supported by the Paycheck Protection program and other federal relief. But many companies are facing an uncertain winter due to the prolonged length of the pandemic and stalled efforts to pass new economic stimulus in Congress. Business owners have taken steps such as cutting jobs, reducing hours, or stopping payments to themselves to help their company survive.
The increase in business applications has likely been driven by both traditional entrepreneurial demand and those capitalizing on better financial opportunities, but also by the unique circumstances of the pandemic. Some people are launching new businesses after being forced to close their previous ones during the widespread lockdowns in the spring, and others have started working for themselves after being laid off.
