Crisis Looms Over Small Businesses Amid Lockdown: What Lies Ahead?

From bills to employees’ salaries, young entrepreneurs stare at a host of challenges during lockdown.

Updated
India
5 min read

"Ever since the lockdown has been announced, our sales graph has come to nil as the portals we sell on are shut. And people aren't placing any direct orders as courier companies are also non-operational. This is a huge loss for us as our grosses are totally dependent upon the daily sales we do," says Geetam, a young entrepreneur who runs a home-made gifting brand.

She is worried about her monthly expenses – rent, electricity, and salary for employees. Calling it “a difficult situation”, she expresses uncertainty about early recovery.

Geetam is unsure about when she can smoothly start selling her creative items and when her business will come back on track.

Like her, a host of small business owners and freelancers from various industries now find themselves in a lurch as India observes a nationwide lockdown to mitigate coronavirus spread, which now has been extended further till 3 May.

'Future of India' Feel Adrift

Once considered the future backbone of the Indian economy, more than 15 million Indian freelancers along with many small, mostly home run business owners – that account for nearly 25 percent of the Indian economy – stare at an uncertain future as COVID-19 cripples the economy and brings financial growth to a standstill. A recession, too, seems inevitable.

As positive cases of deadly coronavirus continue to rise and we remain unaware about the end of this never-seen-before situation, it is only imperative to ask:

  • What lies ahead for these young entrepreneurs, who have efficiently contributed to India's financial growth over the years?
  • Who will extend a helping hand to them and save their businesses from sinking further?
  • Will the Indian government, while tackling healthcare and the poor people's concerns, be able to offer relief funds like the US, UK, and Canada have done, for their freelancers or gig workers and SMEs, so that they can withstand the losses?
Self-employed and small business owners await answers while living in panic and fear, with some of them wondering why a package has not yet been touted by the Centre.

According to a survey done by LocalCircle, of 29,000 small startups and SMEs, around 70 percent suggested a few measures that the government can take. About 31 percent said the government should reimburse 50 percent salaries of startup employees for 1 month. Among other suggestions were a one-time grant of Rs 20 lakh and a two-year interest free loan of up to Rs 1 crore for SMEs.

However, a few of those who spoke to The Quint are of the opinion that the migrant workers, the poor and the healthcare system need government's full attention in this testing time. The jury is divided.

As of 15 April, India has not announced a relief or aid for them.

Cash Grant, Low Interest, More For Other Countries' Workers

UK government announced financial aid for the self-employed, saying it will grant up to 80 percent of their average monthly profits. US too announced provisions such as cash grants and low-interest loans as a part of its $350 billion loan program.

Similarly, Canada has decided to give payments of $900 every two weeks to freelancers and gig workers.

Let's closely look at the stories of Indian freelancers and entrepreneurs from different industries and their demands from the government in this distressing time, if any.

Tourism

Jatin, co-owner of Plan the Unplanned, a tour and trek company based out of Bangalore, expresses his worry as the tourism industry is one of the worst affected due to COVID-19 scare.

Over the years, Jatin and his company have taken many travel enthusiasts on treks. He started the company in a small room and gave it a boost by investing in aggressive marketing. But now, with travel restrictions in place, he feels his business is in the lurch.

"We have salaries due, we have payment due to our vendors and there is no cash flow. For the next six months, we do not see any growth in the tourism industry," Jatin tells The Quint.

He thinks that the government should soon announce a relief fund. He says:

“We would require financial assistance from the government but that’s only a hope for middlemen like us.”

Events & Digital Marketing

Jahnvi Sharma, a 27-year-old young entrepreneur who runs a digital marketing company, Rugsack Media, tells us that she is having a difficult time managing her business.

She had invested her own money and resources for events that were planned for March-April but as the clients had to cancel the events due to the lockdown, she alone bore the brunt.

"The clients are reluctant in paying the whole amount and want us to compensate for their loss, which is not possible because we are a very small company. So, at this point, we really don't know whom to approach, what to expect and where to go," Jahnvi says.

On the question of whether the government should step in, Jahnvi says:

“The government has asked us to pay salaries to employees, which is important we know, but we are not getting payments from our clients. At this point, we request the government to use labour welfare funds and to share the load with us. Otherwise, it will be the death of entrepreneurship.”

She further expresses her concerns about the three-month moratorium relief given by the RBI. She adds, "I have applied for one myself and realised that it's loss more than profit. By the end, we end up paying interest on interest because the government has only deferred the payment and there is no relief on interest."

Marketing & Blogging

Kopal Jain, a freelance content creator & marketeer, owner of Traversed Lands, on the question of how the lockdown has impacted her work told The Quint: "There is a feeling of uncertainty for sure. Things look bleak because the first thing the brands are going to do is axe their advertising budget which would lead to little or no work for freelancers and creators like me. Even recovering payment for my recent work would be taxing, let alone my future assignments."

Kopal further tells us that freelancers like herself don't have a rainy day fund due to inconsistent income.

While both marketing and freelancing are jobs easily done from home, due to disruption in the workflow, most clients don’t have the same work demand as before.

It is possible that some of the clients, considering the money crunch, wouldn’t want to invest in freelancers and marketing.

While Kopal is aware of financial challenges that she is going to face, she also thinks that the government should first provide medical equipment and testing kits to medical institutions.

"I am aware that the governments in the UK and in the United States have announced monetary compensation for freelancers, but in a country like ours where the government is already struggling to provide basic medical equipment and testing kits to the medical institutions, it doesn't seem fair to seek their attention and bandwidth in such trying times", she adds.

Clothing & Lifestyle

Highlighting the importance of social interactions and connections for her business, Namrata, founder of The Narration, a clothing brand says, "Our business depends on a lot of collaborations and connections which help us in growing and building our identity in the market. Due to the lockdown, we are unable to build these connections and work on our upcoming product lines."

She is also unable to take orders from her clients which has given her business a serious jolt.

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