24 March 2020 08:34
"I wish I had a crystal ball to say how long this is going to last," said Maxine Turner, owner of Salt Lake City-based catering company Cuisine Unlimited. "I cringe when I hear three months. That makes me incredibly nervous because we don't have the revenues, the rainy-day funds, to see us through three months." Turner said she has already had to furlough about 80 percent of her company's 50 employees after most of its revenue dried up in about a week, thanks to event cancellations and the closure of a hotel for which they provide catering services. "We're not the only ones," said Turner, whose company only operates on about a 3 percent margin. "I don't know of a catering company, I don't know of a restaurant who isn't going through this same thing." According to a 2018 U.S. Chamber of Commerce survey, one-third of businesses with fewer than 500 employees had no funds for unexpected expenses, with newer businesses, retailers and companies owned by women being the most likely to not have a financial buffer.
"There is not an industry we haven't heard from within our membership in talking to us about the devastating impact this is having on their business," said Holly Wade, director of research and policy analysis for the National Federation of Independent Business. "The longer this drags out obviously the more devastating this will be for the small business community," she said. "The business owners who we've heard from across the country, they are in immediate need of a cash infusion to help them get through this crisis." The stimulus package would allow the government-backed loans to be forgiven if small businesses use them to keep workers on payroll, but many companies argue that the government should offer grants with no interest and no requirement to repay. The SBA itself is also offering low-interest loans through emergency programs, though not all 50 states have yet been declared a disaster area, which is necessary to make those funds available everywhere. Sam Taussig, head of global policy at financial technology lender Kabbage, says the amount of government money needed to help small businesses is at minimum $500 billion and probably more than $1 trillion. Kabbage, whose customers are small businesses, is pushing for SBA to allow fintechs and other lenders to help underwrite emergency loans originated by the government. "There are 30 million small businesses in America, and even if only 1 million need a loan, [SBA] would never be able to process all of that," he said. Businesswoman Turner said the government should give grants to companies that have been affected the most and then offer low-interest SBA loans for the next hardest hit. The loan forgiveness program, she said, "still means that small businesses need to maintain employees." "No small business is going to be able to maintain employees on their payroll if there's no revenue coming in," she said. "Let the revenue be generated and that in turn will bring the employees back in because I'll need them." Loan forgiveness could have other logistical difficulties, including whether there is enough funding, said Karen Dynan, who served as chief economist at the Treasury Department from 2014 to 2017. "It seems like a lot of money, but I'm not sure it's enough money to cover payrolls for small businesses, and if it doesn't, there are going to be all sorts of questions about who gets the forgiveness and who doesn't," she said. Dynan, now an economics professor at Harvard University, also said financial regulators should be looking for other ways to boost small businesses, which often fund their operations through personal credit cards or home equity lines. She suggested mortgage financiers Fannie Mae and Freddie Mac could make conditions easier for homeowners to take out cash when they refinance their mortgages. She praised Congress' proposed move to expand the eligible group of lenders that can provide loans backed by the SBA, as existing lenders only have so much room to allocate toward small business credit. But she said that might take time to get up and running, as it requires approval from the Treasury Department. "Anything we can do to increase the speed would be helpful to try to support the small business sector," she said. "Whether it's enough of a step — I think it's still going to take more time than we would want it to take." She cited her experiences during the 2008 financial crisis when policymakers designed programs to prevent foreclosures. "All this focus was on what would be fair and what would prevent moral hazard and what would ensure that only deserving people got the money," she said. "In the end, as well-intentioned as those efforts were, they just slowed things down." The Federal Reserve on Monday also said it would be launching another emergency lending facility to boost lending to small- and medium-sized businesses, similar to ones it has started to keep financial markets from freezing up. The central bank didn't give details on the program, but Sen. Mark Warner (D-Va.) has suggested that the Fed — with credit protection from the Treasury — could purchase low-interest small business loans from banks for an immediate boost to those companies, according to a proposal obtained by POLITICO. That idea is also being advocated by the Chamber. "That will have the quickest impact," said Tom Sullivan, vice president of small business policy at the trade group. "We're hoping that [Fed Chair] Jay Powell works quickly to allow more lenders to provide that capital." Sullivan also argued that policymakers shouldn't get bogged down in restrictions for help to small businesses. "I'm hopeful that there is a level of trust between policymakers and what they believe small business owners are doing and will do with regards to their employees," he said. "They need money to keep their doors open."