What Small Biz Needs Now — Small Business & COVID-19

What small businesses need now…

Amid a once-in-a-century pandemic, Senate Republican leaders are refusing to meaningfully help the country’s 30 million small businesses and more than 16 million unemployed workers. With small business assistance and unemployment benefits already lapsed, this refusal threatens to pitch the country into a prolonged depression that will wipe out our small business sector – particularly Black-owned and Latinx-owned businesses – and cost families jobs, homes, meals, medications, and lives.

In May, the House of Representatives passed legislation, the HEROES Act, to provide short-term relief to small businesses, workers, and state and local governments. In the more than two months since, the Republican-led Senate has ignored the crisis, proposing legislation only as unemployment benefits and other aid was expiring. This legislation offers little hope and much harm for small businesses and workers, however. Instead of supporting the businesses and workers on the frontlines of the health and economic crisis, Senate Republicans aim to immunize corporations for cutting corners on health and safety, imperiling lives and undercutting responsible small businesses. Moreover, at a time when vast majorities are calling for racial equity, Senate leadership wants to double-down on inequality and make life even more dangerous for people most at risk in the pandemic.

This is a make-or-break moment for our country. As of June, more than 1.2 million business owners had closed up shop compared to February. Among businesses on the Yelp platform, almost 73,000 have permanently shuttered since March 1. The number of Black business owners has plummeted at a rate almost four times that for white owners; the number of Latinx business owners has dropped at twice the rate for whites. More than 150,000 people in the U.S. have lost their lives to the pandemic, and there is no end in sight.

Our senators have a choice. They can ignore coronavirus and give corporations a free pass to endanger workers and customers, profiteer from the pandemic, and eliminate small business competition. Or, senators can act to save lives and livelihoods, protect the small businesses our communities need to thrive, and make our country more equal. So far, Republican leaders in the Senate are choosing corporations and catastrophe. It is not too late for them to reverse that decision.

This storybook features the experiences of small business owners who are struggling to save their businesses, offer quality jobs to people in their communities, and keep their employees, customers, and families healthy in the face of a deadly pandemic. Many of these business owners, operating establishments in Black or Latinx communities, were shut out of the temporary Paycheck Protection Program (PPP) that kept some small businesses afloat through the spring. Others received PPP funds but, with those funds ending, again face uncertainty and insurmountable debt. And all small business owners featured here know that their businesses can survive only as long as their customers have money to spend -- money that to a large extent has evaporated with the end of pandemic unemployment benefits.

These small business owners call on their senators to pass legislation that meets the needs of small businesses, workers, and communities most affected by the pandemic. Among the measures this legislation must include are the following:

Equity grants to address the racially discriminatory effects of prior relief packages
Robust payroll support for the duration through expanded, more equitable Employee Retention Tax Credits
Renewed federal pandemic unemployment insurance benefits, as well as other forms of direct cash relief for workers that does not discriminate against immigrants
Health protections and safety standards instead of corporate immunity for bad actors that cut corners on customer and employee health and safety, hurting responsible small businesses

Read the Stories

No More Short-Term Fixes Built on Racist Structures

Previous Small Business Aid Provided a Temporary Fix for Some Firms, Excluded Many Others

When the pandemic hit in March, Congress passed legislation that included short-term funds for small businesses, primarily through the newly-created PPP. The PPP was distributed through the Small Business Administration’s 7(a) program, which relies on financial institutions and a private lending system historically and persistently rife with racial discrimination.

These choices produced predictable results. In a survey conducted by Color of Change and UnidosUS, only 12 percent of responding Black and Latinx business owners received the full federal aid they had sought; 41 percent received no aid at all after applying. More than half of respondents who did not apply did not do so because they were not eligible for the relief or believed they would not be approved. A study conducted by the National Community Reinvestment Coalition (NCRC) bears out this fear. Using Black and white testers, NCRC found that applicants seeking pandemic-related loans were treated differently with regard to the levels of encouragement they received, the loans offered, and in the information provided about loans.

Even for those business owners who did manage to receive funds, the process was cumbersome and confusing, and the program has provided only short-term relief while the pandemic continues to surge. Moreover, the PPP likely protected only an estimated 2.3 million jobs at a cost of $224,000 each according to research from MIT and other institutions. In all, according to the Washington Center for Equitable Growth’s Amanda Fischer, “it appears that the Paycheck Protection Program was a successful liquidity backstop for firms that may have needed marginal help meeting payroll during the worst of the mandatory lockdowns, but it did not prevent layoffs,” nor did it reach businesses in the hardest-hit areas.

Boost for Small Businesses Through Expanded Unemployment Insurance

In contrast, the pandemic unemployment insurance (UI) included in prior coronavirus relief legislation has helped keep the economy afloat amid historic business closures and job loss. This UI expansion supplemented benefits by $600 a week and extended coverage to many people, including independent contractors, excluded from traditional UI.

Without this relief, the current economic crisis would have been an even greater catastrophe. These pandemic benefits allowed unemployed workers to increase their spending, rather than cut back, as normally has been the case. Researchers from the University of Chicago and the JP Morgan Chase Institute credit this expansion of UI benefits with not only protecting recipients from extreme financial hardships but also boosting aggregate demand -- a key factor in small businesses’ ability to survive.

With these benefits expired and the rug pulled out from under unemployed workers, economists now warn of damage to the overall economy. Mark Zandi, chief economist at Moody’s Analytics, projects that the elimination of the expanded UI benefits will cost the U.S. 1.1 million jobs and a 1.27 percent reduction in GDP, with similar results if only $200 a week in benefits are restored. This will deal an additional blow to small businesses, for whom loss of revenue is the greatest threat. In a recent survey of 250 small business owners and employees, loss of revenue was the most commonly cited as both the top concern over the next six months (35 percent) and as the biggest long-term consequence of COVID (24 percent).

Senate Legislation Rewards Corporate Wrongdoers, Hurts Small Businesses and Workers on the Frontlines

Despite the devastating blow to Black and Latinx businesses and small business overall, Republican leaders in the Senate are doubling-down on failed approaches that have increased racial inequality while refusing to provide the full relief that small businesses, workers, and communities need.

No grants for businesses excluded from prior packages due to systemic racism and preferences for larger small businesses. Republicans are proposing to renew the PPP and again funnel aid through the deeply flawed and discriminatory 7(a) program. Doubling down on the system that produced so much discrimation on capital access in the last round, Republican Senate leadership’s answer to racial inequity is more loans. This will not get to the small business owners who need it most -- Black and brown small business owners. While this program may provide a supplemental benefit to some larger small businesses, very small businesses, especially the unbanked, will not take on loans in a deepening financial crisis. These businesses need grants, not loans.

Inadequate ongoing payroll support through the Employee Retention Tax Credit program. The Republican legislation does include a much-needed expansion of the Employee Retention Tax Credit (ERTC) -- a better, more equitable route to achieve the dual goals of maintaining employment and sustaining small businesses than the PPP. However, limited to 65 percent of wages, the reimbursement rates and overall caps are far too low to be meaningful for affected small businesses, and the proposal does not include a percentage to cover fixed costs, as provided in the HEROES Act and Payroll Security Act.

Little to no UI extension or other direct assistance to workers. Thus far, Senate Republicans have not put forward legislation to reinstate the unemployment benefits that have powered the economy for working families and small businesses since the start of the pandemic. Reports indicate that Republican leaders are debating window-dressing levels of UI rather than the full amount needed to stem a depression.

Corporate immunity that rewards bad actors and punishes responsible small businesses. Republican leaders in the Senate are proposing corporate immunity for businesses that expose customers and workers to coronavirus. This giveaway to big business would precipitate a race-to-the-bottom on safety that hurts responsible small businesses, which are already protected under state law. Those most hurt will be the Black and Latinx business owners hardest hit by the pandemic, the Black and Latinx frontline workers suffering and dying from COVID at alarming rates, and communities of color across the country that are shouldering a disproportionate burden of disease.