Small businesses, slammed by coronavirus, plead for quick help

“I wish I had a crystal ball to say how long it will take,” said Maxine Turner, owner of the Salt Lake City-based catering company Cuisine Unlimited. “I startle when I hear three months. That makes me incredibly nervous because we don’t have the income, the funds for rainy days to last three months. “

Turner said she had to take around 80 percent of her company’s 50 employees on vacation after most of the sales had dried up in about a week thanks to event cancellations and the closure of a hotel for which they offer catering services.

“We are not the only ones,” said Turner, whose company only operates with a margin of around 3 percent. “I don’t know of a catering company, I don’t know of a restaurant that doesn’t go through the same thing.”

According to a 2018 U.S. Chamber of Commerce survey, a third of companies with fewer than 500 employees didn’t have funds for unexpected expenses, with newer companies, retailers, and women-owned companies most likely not having a financial buffer.

“There is no industry we haven’t heard of within our membership when we spoke to us about the devastating impact this has on their business,” said Holly Wade, director of research and policy analysis at the National Federation of Independent business.

“The longer this takes, the more devastating it becomes for small businesses,” she said. “The business owners we have heard of across the country need an instant infusion of money to deal with this crisis.”

The stimulus package would allow government-backed loans to be granted when small businesses use them to keep workers on the payroll. However, many companies argue that the government should offer grants with no interest and no repayment obligation.

The SBA itself also offers low-interest loans through emergency programs, although not all 50 states have yet been declared a disaster area, which is necessary to make these funds available everywhere.

Sam Taussig, head of global politics at financial technology lender Kabbage, says that the amount of government funds needed to support small businesses is at least $ 500 billion, and probably more than $ 1 trillion.

Kabbage, whose customers are small businesses, is pushing for SBA so that fintechs and other lenders can help the government take out emergency loans.

“There are 30 million small businesses in America, and even if only 1 million need a loan, [SBA] would never be able to handle all of this, ”he said.

Businesswoman Turner said the government should grant grants to the hardest hit, and then offer low-interest SBA loans for the next hardest blow. The lending program, she said, “still means small businesses need to keep employees.”

“No small company will be able to keep employees on its payroll if there is no income,” she said. “Let the revenue generate, and that in turn brings the employees back because I need them.”

Lending could have other logistical difficulties, including whether there is sufficient funding, said Karen Dynan, who worked as chief economist in the finance department from 2014 to 2017.

“It seems like a lot of money, but I’m not sure if it’s enough money to cover small business payslips, and if it isn’t, there will be all sorts of questions about who gets the forgiveness and who does not. “she said.

Dynan, now an economics professor at Harvard University, also said that financial regulators should look for other ways to help small businesses that often do business with personal credit cards or home lines. She suggested that mortgage lenders Fannie Mae and Freddie Mac could make it easier for homeowners to borrow cash when refinancing their mortgages.

She praised the move proposed by Congress to expand the eligible group of lenders who can provide SBA-backed loans because existing lenders have so little leeway for small business loans. But she said it could take some time to be operational because it needs approval from the finance department.

“Anything we can do to increase speed would help support the small business sector,” she said. “Whether it’s a step enough – I think it will take even more time than we would like.”

She cited her experiences during the 2008 financial crisis when policymakers developed programs to prevent foreclosures.

“All of this focus was on what was fair and what would prevent moral hazard and what would ensure that only deserved people got the money,” she said. “In the end, as well as they meant these efforts, they just slowed things down.”

The Federal Reserve also announced on Monday that it would set up another emergency credit facility to boost lending to small and medium-sized businesses, similar to those it started to prevent financial markets from freezing.

The central bank did not release details of the program, but Sen. Mark Warner (D-Va.) Proposed that the Fed, with credit protection from the Treasury, could buy low-interest loans for small businesses from banks, according to a proposal from POLITICO, to strengthen those businesses immediately.

The Chamber also supports this idea. “This will have the fastest effect,” said Tom Sullivan, vice president of small business policy for the retail group. “We hope that [Fed Chair] Jay Powell is working quickly to allow more lenders to provide this capital. “

Sullivan also argued that policymakers should not get stuck in small business aid restrictions.

“I am confident that there is a degree of trust between policy makers and what they think small business owners will do and do,” he said. “They need money to keep their doors open.”

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