![]() ![]() ![]() Less clear is whether expense growth accelerated after these liquidity increases, or whether they continued to track the slow recovery of revenues. From mid-April to May, cash balances increased sharply, but with a timing that was consistent with the arrival of cash inflows from federal programs including, but not limited to, the Payroll Protection Program and other CARES Act programs (Farrell, Wheat, and Mac 2020c). In the early months of the pandemic, expenses fell sharply along with revenues (Farrell, Wheat, and Mac, 2020a). The trajectory of cash balances and revenues since April raises an important question for policymakers about the extent to which small businesses continue to make payments to employees and other suppliers. 1 Notably, these balance increases occurred while small business revenues remained at levels meaningfully below levels observed prior to the pandemic. However, in subsequent months, cash balances saw substantial increases and remained at levels substantially higher than they were prior to the pandemic (Farrell, Wheat, and Mac 2020c, Census Bureau 2020). These observations are consistent with the view that revenues and cash liquidity are strongly related to small business survival (Farrell, Wheat, and Mac, 2020b). In the early months of the pandemic, the typical small business saw substantial revenue and cash liquidity declines (Farrell, Wheat, and Mac, 2020a, 2020c) moreover, there were high observed rates of small business failures. As the COVID-19 pandemic continues to affect the physical and economic health of the U.S., policymakers continue to have an incomplete view of the financial response of the small business sector.
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