The City of Charleston has implemented a shelter-in-place order. Columbia has done the same. There are even calls for Gov. Henry McMaster to do so for all of South Carolina.
As a result of all governments’ actions and instructions to citizens for containing COVID-19 from spreading, small businesses are in crisis.
How serious is it?
Goldman Sachs conducted a national survey of small businesses last week and found that about 51 percent of the owners said that under current conditions they would only be able to “operate for 0-3 months.”
The S.C. Small Business Chamber of Commerce conducted a poll of its supporters this week and found about 60 percent 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 percent have lost 50 percent or more of their revenue while 40 percent in “shelter-in-place” regions and 30 percent 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.
Unemployment claims in the state jumped 1,600 percent in one week.
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, 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.
Small business owners in operation as of February 15 of this year can apply to SBA approved private lenders for soon-to-be-approved loans of up to 2 ½ times their average monthly payroll. These loans will be 100 percent backed by the federal government.
Normal loan underwriting, including proof of ability to repay the loan, will be waived 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 percent 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.
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; in maintaining a more normal local business economy; and 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.