Hilton Head Island Packet
March 27, 2020
By Frank Knapp Jr.
Small business is in a crisis because of government’s appropriate actions to contain the COVID-19 from spreading.
How serious is it?
Goldman Sachs conducted a national survey of small businesses last week and found that about 51% of the owners said that under current conditions they would only be able to “operate for 0-3 months.”
The South Carolina Small Business Chamber of Commerce conducted a poll of its supporters this week and found about 60% saying that, without an infusion of cash, their business would not survive the next 3 months.
A survey released this week by Businesses for Responsible Tax Reform of its network of small businesses found that 70% have lost 50% or more of their revenue while 40% in “shelter-in-place” regions and 30% in non-shelter-in-place areas have been forced to close.
Small businesses still open across the country are cutting costs primarily by reducing worker hours and layoffs. Other costs are harder to reduce, like payments for rent, utilities, insurance, and existing loans.
And with the dramatic increase in unemployment, there is even less money circulating in the economy to help with consumer demand.
Many economists insist that we are already in a recession and no one knows how long it will take to revive the economy when the health crisis eases.
What experience from the recent Great Recession tells us is that it will be small businesses that will lead us out of this recession by creating jobs.
But that won’t happen if we lose small businesses in the next three months at the rate indicated by surveys. Without our small businesses, we will be facing a very long road back, possible years, to a healthy economy.
Fortunately, Congress has recognized the need of small businesses for a fast, sufficient, flexible, and non-debt cash infusion to keep alive.
The bipartisan $2 trillion stimulus package contains $377 billion for small businesses to obtain loans for operating expenses.
The general outline received from a Senate office is very encouraging.
Small business owners in operation as of February 15 of this year can apply to SBA approved private lenders for loans of up to 2 ½ times their average monthly payroll. These loans will be 100% backed by the federal government.
Normal loan underwriting, including proof of ability to repay the loan, will be waved and there will be no borrower or lender fees. Checks will hopefully be received by the small business in 7 days after a successful application submission.
The loans can be used for any business expense. However, if the money is used for payroll, rent, utilities or interest on a business mortgage; the small business owner will have that part of the loan forgiven making this money essentially a grant.
There will be no loan payments for the first 6 months. After that, only loan money used for non-forgivable expenses will require loan payments not to exceed 4% interest.
This small business loan program is intended for immediate relief. If this economic crisis goes on for too long, Congress will need to consider approving more assistance to small businesses.
While many have referred to the money in the stimulus bill targeted to big corporations as a “bail out”, this infusion of federal dollars to small businesses is not a handout.
It is an investment in keeping people working and getting a regular paycheck instead of a smaller unemployment check. It is an investment in maintaining a more normal local business economy. It is an investment in supporting the emotional and psychological health of our citizens as they worry about the future.
And it is an investment in the essential local small business infrastructure we will need when we turn the corner on this crisis.
Frank Knapp is the president and CEO of the South Carolina Small Business Chamber of Commerce and Co-chair of Businesses for Responsible Tax Reform.
https://www.islandpacket.com/news/coronavirus/article241529501.html