The pandemic’s business costs are growing by the month.

Some 163,000 U.S. businesses were still shut down as of Aug. 31, and nearly 100,000 of them have indicated the closure is permanent, according to Yelp, the online business directory and consumer review site.

America boasts nearly 30 million small businesses, which account for about 45% of the U.S. economy. Some 4.2 million companies, or about 14%, applied earlier this year for forgivable loans under the Paycheck Protection Program managed by the Small Business Administration to keep small firms afloat and workers employed during the COVID-19-induced economic shutdown.

Particularly devastated have been restaurants and bars, which have taken a revenue hit due to social distancing rules and skittish customers. The financial firm UBS has predicted that one in five restaurants nationwide could fail as a result of the pandemic.

As a result, banks are preparing for a slew of loan defaults, particularly if the federal government fails to deliver another round of economic stimulus. In July, JP Morgan Chase, CitiGoup and Wells Fargo collectively set aside $28 billion to cover expected pandemic-related loan losses in their portfolios. Fitch Ratings reports that the national default rate for leveraged loans had continued an eight-month climb, reaching 4.3% in August, the highest level in more than a decade. Retail businesses have accounted for 20% of defaults in 2020.

Related Articles

See All

Hedge Funds Gobbling up Single-family Housing

August 16, 2022
1 min read
Brief: Banking
Read More

AMG Named Top-Performing Bank by Independent Banker Magazine

June 1, 2022
< 1 min read
Brief: Banking
Read More

An App Won’t Finance Your Dream

May 24, 2022
< 1 min read
Brief: Banking
Read More

Get the latest in Research & Insights

Sign up to receive a weekly email summary of new articles posted to AMG Research & Insights.