The pandemic has certainly dealt with small business owners their fair share of problems throughout the past few months. One, however, that many are now really just starting to notice is the fact that the nation has a bit of a coin shortage. As businesses are back up and running, for the most part, it seems that company heads are having to try and figure out how to handle the fact that the country is low on coinage.
How did this come about?
Looking back at the first half of the year, it only stands to reason that many companies struggled. By mid-March, numerous businesses had to close their doors—some never reopened. In conjunction with business closings, we also saw a vast number of government offices close up for the duration of the quarantine. One of the primary ones that shut down: the US Mint.
The US Mint is responsible for printing paper money as well as creating the coins that we use daily. It is therefore easy to see how relevant the Mint is to the US economy as a whole. So what happens when the US Mint has to shut its doors for an extended period...there is an inevitable disruption in the cycle of money creation and thus we are now witnessing a coin shortage. Not to mention, top that off with the fact that banks were also essentially closed save for an online presence—this too contributed to the lack of coinage that we now have.
The Federal Reserve is currently working hand in hand with the US Mint to try and rectify the issue. While by and large, the amount of coins in circulation is efficient, the problem seems to be that because of the disruptions we recently faced certain parts of the country are having a hard time keeping coins in circulation.
A depressed retail sector is another reason for the scarcity of coins. Recently the Mint has seen a huge increase in the orders for new coins. They are asking every community for help regarding addressing the coin shortage situation.
How does a coin shortage affect your business?
While there has been an emergence of alternative payment methods, for many small businesses especially in smaller towns, cash is still king. A recent poll showed that 75% of small business owners do indeed accept cash. It is still by far the preferred method of payment on a national scale.
So that said, if your business does regularly deal with cash transactions, a shortage of this kind will have an impact. Something as simple as not being able to readily make a change for customers is huge. That customer then grows annoyed, if not angry, and maybe less apt to revisit your storefront. The checkout experience overall slows down and this in turn creates a domino effect in which numerous customers become less than satisfied with the level of service.
There is also the fact that if you flat out cannot make a change, you might have to turn some customers away. And during a time when things are tight financially speaking, this could lead to disaster. On the customer's end, what about those who deal primarily in cash? Not everyone has access to credit cards or digital payment methods. This certainly hurts the cash-paying customers in more ways than one.
Then of course there are the types of businesses that rely on coinage to keep running. Laundromats for example. Many laundromat owners are feeling the pressure as related to the coin shortage. Many are now seeing customers shift away from paying with coins to using cards instead. And numerous such laundromats are consequently having to make some changes to this end. The shift to more digital payment methods seems to be a trend that is coming on rapidly given the scarcity of coins and cash for that matter. Yet another byproduct of the pandemic. A global survey suggests that over 30 percent of respondents are now not accepting cash as a result of the crisis.
That said, the US Mint is reporting that it's currently operating in full production mode. Since June they've minted more than 3 billion new coins, and as more and more businesses get back into the swing of things, they report that coin circulation should be back to normal relatively soon.
What happens though if your company relies on coins?
If in fact, your business model is one in which coin transactions are at the core of how you get paid, you are potentially facing a big problem in the immediate future. And even though the Mint is assuring the country that coin circulation should be normal quite soon, this doesn't solve your problem right now. There are however certain things you can do to try and help the situation. One thing may be to ask your customers to pay with exact change thereby alleviating the need to make a change. Small businesses in general need to make customers aware of the coin shortage problem. Encourage people not to hoard coins during this time, offer cash for coins if relevant to your business. You might even offer discounts for people who utilize electronic payment methods instead.
First Union Lending is here to help. We have been working with small businesses since the start of this crisis and we are invested in seeing our clients through this. With short term loans, lines of credit, and merchant cash advances, among other products, we have a funding solution for you. No off the shelf approach with us. We custom tailor every business loan to suit your specific needs. Some clients even get the cash within their accounts in two business days. And even if your credit is less than stellar, we likely can still get you approved. If you need additional capital to weather the storm, give us a call!