Blog of Frank Knapp, President/CEO of the South Carolina Small Business Chamber of Commerce
March 21, 2020
U.S. Senate Republicans and Democrats are discussing what should be in the Senates Stimulus package which might receive a vote on Monday.
The urgency for Congress to come up with a plan that will work to save small businesses is shown in a survey this week by Goldman Sachs (see story below). About 51% of small businesses surveyed said that they will “only be able to continue to operate for 0-3 months” because of the economic downturn due to the coronavirus.
The GOP is proposing a $300 billion loan guarantee for banks to lend to businesses with up to 500 employees. These loans, in the original proposal, were to be used for 6-weeks of payroll.
History and common small-business sense tell us this loan guarantee program won’t work.
In 2010 President Obama’s Small Business Jobs Act guaranteed $30 billion for banks to make loans to small businesses, something they were not doing. The result was that little of the $30 billion was used because banks just didn’t want to make risky small business loans right after the Great Recession.
Common small-business sense tells us that small business owners who don’t know if they will be around in a few months are not going to take out debt to survive. They will cut as much operational costs as they can and if that isn’t enough, they will shut down.
Fortunately, there are some Senate Democrats who understand that small businesses don’t want loans, they need an infusion of cash from federal grants to stay in business, keep workers on the payroll, and pay for the usual operational expenses.
Two bills to make small business grants were introduced this past week.
Senators Ron Wyden and Ben Cardin rolled out their Save America’s Main Street Act:
What American small business owners need right now is cash. Cash to pay employees, cash to pay rent, cash to pay debt-service, cash to pay vendors, cash just to keep the lights on. Small business owners are weary of taking on more debt when they are fighting to survive, unsure of what even the next six weeks will look like.
Senators Chis Murphy, Jeff Merkley and Chris Van Hollen introduced their Main Street Emergency Grant Program:
Small businesses as defined in Section 3 of the Small Business Act (15 U.S.C. 632) and consistent with SBA size standards by industry for 2019, who have been negatively impacted by the COVID-19 health epidemic, through a reduction in revenue of at least 50%. Nonprofit organizations with under 500 employees are also eligible. Businesses who have been shut down due to state or local regulation would use an expedited process and other businesses could apply by showing hardship.
Both bills offer cash to small businesses to help keep them alive.
However, the Main Street Emergency Program would be available to all small businesses compared to the Wyden/Cardin bill that establishes a “gross receipts” cap.
Getting grants to small businesses quickly to help keep them viable will enable them to keep workers on the payroll. Maintaining the employer-employ relationship will cut unemployment, keep money flowing through local economies, be a big psychological/emotional boost for workers and the public—and will enable the economy to bounce back faster when the health crisis subsides.
Congress must act now!!
Survey: Many small businesses don’t expect to survive long as coronavirus wallops economy
March 21, 2020
More than half of U.S. small businesses say that they won’t be able to operate beyond three months because of the economic impact caused by the coronavirus, a new survey from Goldman Sachs found.
This week, Goldman surveyed more than 1,500 participants in the firm’s 10,000 Small Businesses program, which runs across 48 states and four U.S. territories. Of those surveyed, 54% were female business owners.
There are nearly 30.7 million small businesses in the U.S., employing around 47.3% of the private workforce, according to the U.S. Small Business Administration. Approximately 51% of the business owners surveyed by Goldman reported that they can “only be able to continue to operate for 0-3 months,” according to Goldman.
The results highlight the severe and sudden impact COVID-19 is having on the economy, which is expected to contract and hemorrhage jobs in the coming weeks amid widespread public lockdowns.
According to Goldman, almost all of the respondents, some 96%, said their business has already been impacted by the virus, with 75% reporting fewer sales.
While many Americans are working from home, self-quarantining, or under “shelter-in-place” orders in their cities, 53% of the small businesses surveyed stated that their employees can’t telecommute.
With the growing need for financial relief, 67% are uncertain about how to access or apply for emergency funding. Meanwhile, 75% feel as if they have no voice or not a very strong voice in the policy-making process.