When will the money arrive? That's the urgent question for small business owners who have been devastated by the coronavirus outbreak. They're awaiting help from the $2 trillion rescue package signed into law recently. But, with bills fast coming due, no end to business closings and an economy that's all but shut down, owners are worried about survival.
Millions of owners have faced April 1st due dates for rent, mortgage, credit card and other payments. Some have been granted leniency from landlords and lenders. But even then, there are other business and personal bills that are owed. And employees at least those who haven't been laid off must be paid.
Will Walkerton entrepreneurs and freelancers struggle during COVID-19 government rescue? Photo by Anita Shipley
How quick can we get these government rescue funds?
Relief can’t come soon enough. Many small business owners are cash businesses with small margins. It might be wise to seek Small Business Administration loans.
Freelancers and people whose gig work has vanished are also anxious about having to wait.
Some need to pay electric bills and the mortgages. Luckily, if no revenue is coming in unemployment benefits are there while you wait.
At companies small and large, from restaurants and retailers to sports and entertainment venues, revenue has essentially forced them to become creative. The same for the businesses that support those companies. Even employers that are still operating have lost business as their customers have became too cautious to continue doing business.
The rescue package signed into law last Friday provides for Small Business Administration loans to companies as well as to sole proprietors and freelancers. The loans can be used for payroll, mortgages, rent and utilities, with those amounts forgiven and payments deferred. It will also supply small loans that can, depending on an owner's credit score, be approved quickly. Employers can receive tax credits for retaining workers, though not if they have obtained one of the SBA loans.
Many owners are also seeking separate SBA economic injury disaster loans. And the Federal Reserve plans to set up a program to lend directly to small business owners.
In addition, freelancers are now eligible for unemployment benefits. And owners can be eligible for the $1,200 per person payment that's available to many Americans depending on their income.
Whatever the source of funding, how fast it arrives at businesses in Walkerton the stimulus is sure to have a significant impact on the economy. Slightly, more than half of American workers are employed at businesses with 500 or fewer employees. Every lost job means another person will struggle to pay rent or other bills. Unpaid bills, in turn, cut revenue for other businesses.
Layoffs are mounting, and most analysts forecast that the economy will shrink significantly in the April-June quarter, with some estimating a a 30% annual plunge for the quarter. That would be deepest economic contraction for any quarter in records dating to Word War II. In the week that ended March 21, roughly 3.3 million people applied for unemployment benefits more than 10 times the number for the previous week and nearly five times the prior record high.
Much of the "SBA economic injury loan" processing will be done through local banks. They must retool their technology to do this. It could be months before this money gets out there. Many people hope to be able to maintain payroll, hoping to get this money.
Local Walkerton area businesses looking towards a new future photo by Tammy Allsop Proctor.
On its face, the rescue aid appears to address some of the most vital needs of small businesses, notably their ability to maintain or hire back furloughed workers eventually. The issue is whether it will come quickly enough.
Many businesses today are challenged with cash flow during the nationwide COVID-19 shutdown.
Some no longer have working capital funds available. Most business owners are seeking loans from family and friends as well as some patience from vendors while they await federal help. That $2,400 royalty check coming from the government for individuals may require bigger cash infusions for business people. Will entrepreneurs turn to long lines with other business owners to apply for the SBA loans?
* Joyce M. Rosenburg