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Local businesses were devastated by COVID-19 seemingly overnight, giving Bostonians a harsh reminder that “you don’t know what you’ve got until it’s gone.” Small business owners immediately had to find novel ways to generate enough revenue to pay the bills and keep as much staff employed as possible. Many couldn’t do it, and even beloved institutions — like Artu, Stella, and Coda — were forced to close.
Everyday people, unaware of the challenges of business ownership, have begun to realize just how much they relied on their local taproom or cafe, and just how thin these businesses’ margins are. And while there have been inspiring stories of success, there have been more disappointments and heartbreaks. Federal funds largely failed to reach the most vulnerable businesses, leading many to close, and their employees to lose their jobs. The economic harm can be measured relatively easily; the emotional harm, less so. For a sustainable small business ecosystem to thrive, communities may have to support it more intentionally.
Failing small business
Small businesses did not receive the help they needed from the outset. The country watched several huge chain restaurants receive plenty of aid while the small business owners that needed support the most didn’t get it, with women and minority-owned businesses continuing to experience exponential challenges across the board. Even as some large businesses returned their aid, close to 90% of minority-owned businesses “had no shot” at even qualifying.
The PPP initially ran out of funds in two weeks, and while funds were replenished relatively quickly, it still hasn’t gone far enough in ensuring the longevity of vulnerable businesses. The PPP program was designed to cover eight weeks of payroll and other expenses, forgiving the loans of businesses using these funds to keep staff employed and pay rent and utility costs. As we approach the eight-week mark, the government has extended the period in which funds can be used for payroll to 24 weeks. But without additional funds allocated, businesses have to go back to relying on revenue to cover these costs. And with phased re-opening preventing businesses from operating at full capacity, plus the additional costs of sanitation and safety mounting, it’s highly unlikely that businesses will be able to actually generate the revenue needed to keep their staff employed and their rent paid.
Given that small businesses are a major driver of job creation, the longer that they go without aid to keep on and hire workers, the longer unemployment will stay as high as it is. While getting to enjoy happy hour at a patio may feel to consumers that we’re out of the woods, in reality, we’re nowhere close to a resolution.
Economics aside, the importance of small businesses to communities cannot be overstated. There is pride that comes from products made locally, from shops that sponsor Little League teams, from having a local business owner know your regular order. Businesses that represent the needs of neighborhoods tend to be more diverse and trustworthy.
It’s clear that communities understand the importance of their local neighborhood joint in contrast with chain restaurants in retailers just based on the outpouring of support that occurs every time a beloved business announces its closure. Just look at Great Scott, an independent music venue in Allston: news of its closure generated close to 25,000 Change.org signatures, thousands of comments and shares across social media platforms and music blogs, and immediate coverage in local publications.
Within weeks, Great Scott began working with local business investment platform MainVest, and raised more than $150,000 from both experienced and novice community investors literally buying into the vision of the venue. MainVest has worked with a number of local businesses since its founding in 2018: they’ve supported the launches of Nightshade Noodle Bar in Lynn, Brato Brewhouse in Brighton, Deep Cuts Deli in Somerville, and dozens of other local businesses. MainVest as even found that grassroots investment has continued to increase despite the economic uncertainty of COVID.
Community investment provides a unique opportunity for everyday community members to play a more substantial role in supporting local businesses. Relegated to ordering take-out and joining a virtual experience, community members may feel hopeless or helpless. However, recent changes in regulations allow everyday people, regardless of wealth, to invest in small businesses like breweries, restaurants, or boutiques. Through funding portals like MainVest, anyone with $100 can invest in small businesses, generating potential returns tied to the revenue of the business.
This has positive implications for wealth generation by not just the already-rich, but the everyday person, and it opens up new access for entrepreneurs who have struggled to access institutional capital. By tying repayment to revenue, businesses aren’t tied to burdensome debt obligations when revenue is down, like during an unforeseen pandemic. Instead, repayment is tied to revenue, incentivizing investors to contribute to the growth of the business.
Capital raised through MainVest has empowered breweries to improve canning operations, increasing retail sales when in-person sales are impossible. It’s helped businesses to create jobs when others are laying off staff entirely. And all of this is happening at the benefit of communities, not big banks, because capital raised through MainVest typically comes from individual grassroots investors within a 10-mile radius of the business itself.
Community investment, intentionally shopping local, and rallying behind small business-friendly policy are the only ways that communities can see local businesses saved. If the stories of Great Scott, Brato Brewhouse, and other businesses accepting community investment are any indication, it is indeed possible to create local capital loops that build more resilient economies and businesses.
Not everyone will be able to afford a $100 investment, and that’s where other forms of support — sharing small business’s messages across social media or shopping local wherever possible — become vital. But those who are able to take the next step in supporting businesses should consider stepping up to the plate if they want to see local businesses survive and thrive in the “new normal.”