“Small business economies have run out, winter weather has made outdoor adjustments unnecessary, and large-scale vaccination is not expected until mid-2021,” said Luke Pardue, an economist at payroll firm Gusto. noting that the initial aid infusion in April took place. in two weeks before being completed. “Eight weeks of pay support for companies lucky enough to get help is simply not enough.”
The new Biden administration is expected to give a new impetus to economic relief that many Democrats hope will surpass the current package. But even if support for small businesses has broad bipartisan support, it is not clear that a heavily divided Congress will go for another massive rescue, especially with a vaccine on the way.
“Anyone who thinks this bill is enough doesn’t know what’s going on in America, they don’t look into the eyes of a small business owner who loses his business,” Senate Minority Leader Chuck Schumer said Sunday as lawmakers they were preparing to adopt the legislation early in the week.
The resumption of aid has far-reaching implications for the economic recovery, with small businesses employing almost half of the private sector workforce. On Thursday, the Department of Labor said the number of Americans applying for unemployment benefits again rose to 885,000. The percentage of small businesses that reported a decrease in employees has increased since October, according to census data.
“There are small businesses across the country that have virtually failed to function and are just hanging on,” Federal Reserve Chairman Jerome Powell said Wednesday. “It would not be bad to see people losing their businesses, the work of their lives. in many cases, or even worth the work of generations, because they could not last a few more months. “
While the initial phase of the PPP distributed $ 525 billion, it was hampered by concerns that private banks – which provided government-guaranteed loans – had left many companies on the sidelines, especially those owned by minorities. MPs say they have tried to better target funds under the new legislation, limiting eligibility to smaller businesses, which have seen significant declines in revenue – although restaurants, among the hardest hit, will not receive the dedicated bailout they have sought. The plan would allow companies that received PPP funds earlier this year to apply for a second loan.
Union officials have questioned whether the program has done enough to ensure companies continue to pay workers. But the PPP structure will largely remain in place and could be more complicated than before.
Says Robert Miller, owner of a Pittsburgh restaurant, “A second PPP will help cash flow in the short term, but it certainly wouldn’t be enough with the amount of mitigation orders that have been levied on the hotel industry.”
The small business package that Congress has put together is a mix of loans and grants that would once again be managed by the Small Business Administration in cooperation with the Treasury Department.
The $ 284 billion in new PPP loans accounts for most of the financing of new small businesses on the bill. When the initial PPP loans stopped in August after distributing about half a trillion dollars, the program remained nearly $ 134 billion.
The new version will allow companies to use the funds on a longer spending list, and loans will be available to a wider range of nonprofit groups and local media companies.
But extending the money for the second loan will be helped by the lawmakers’ decision to reduce the maximum loan size to $ 2 million from $ 10 million and restrict who can access the money in an effort to target smaller businesses, in difficulty. In order to obtain the so-called second drawdown loans, companies will have to prove that they suffered a 25% loss of revenue during the pandemic.
The bill will dedicate $ 25 billion to second-time borrowers with 10 or fewer employees or loans of less than $ 250,000 in low-income areas. Another $ 15 billion would be allocated to borrowers who meet these criteria.
Labor lawyers are worried about whether wages will be reduced for workers. The hotel and trade union Unite Here has called for more employee-centered protections, including calling on companies to give laid-off workers a chance to return before hiring new workers.
“We are disappointed that Congress has not added guarantees to ensure that this funding actually goes where it is needed: to save small businesses and to keep workers employed,” said United Here research director Marty Leary.
A $ 120 billion fund to support restaurants has fallen by the wayside, as has the industry facing new restrictions on social distancing and colder weather threatening outdoor dining. In the new bill, Congress instead offered restaurants and hotels a more generous contribution of PPP funds – up to three and a half months’ salary on loan instead of the two and a half months allowed for other industries.
Restaurant owners plan to push Congress next year for more assistance. The Coalition for Independent Restaurants said the bill “is very short”. Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, cited the dynamics in New Orleans, which he said has more restaurant supply than local demand.
“Cruise ships will need to return online,” he said. “Business travel will be needed, returning to where it was. Bourbon Street partygoers will need to fill the city every night. Everything must take place before all restaurants can return online. You can say the same for just about any community that relies on tourism or business travel. “
The executive vice president of the Association of American Banks, James Ballentine, said the PPP program “is the kind of eight-hour energy drink that is so necessary for a number of small businesses,” but that they need “long-term care” to survive.
The PPP funding in the bill will be supplemented by additional funding for other SBA loans and grants, including $ 20 billion in grants for the crash loan program and $ 15 billion in grants for art venues and entertainment. Small business lawyers have been urging Congress for months to rely less on banks to lend.
“Targeting the PPP dollar to businesses in urgent need and declining revenues will help expand the money further, but many companies, especially those unable to access the program during the summer, will not be helped,” said Amanda Ballantyne, executive director. to the Main Street Alliance. “That is why the extensions of the grant program in the bill are so necessary.”
The new legislation would give the SBA 10 days to write rules for the renewed rescue of small businesses. The deadline reflected a sense of urgency to get help from struggling employers. But the timing – during the holidays and in the midst of a presidential transition – has upset the banks that will be responsible for issuing PPP loans based on SBA guidelines.
“It is imperative that the SBA provide all the rules before accepting requests for a transaction to proceed smoothly,” said Richard Hunt, president and CEO of the Consumer Bankers Association. “Writing the rules in 10 days would invariably lead to unintended consequences.”
Advocates for a more comprehensive rescue of small businesses say Congress’s inability to think more than the PPP is problematic, as it will likely be more difficult for lawmakers to agree on additional aid next year. Congress is likely to remain divided. The launch of Covid-19 vaccines will make it easier for policy makers to make mistakes in not spending more to help the economic recovery.
“From the beginning, Congress has consistently opted for a short-term approach to small business aid, creating a mismatch between the scope of each round of aid and the duration of the crisis itself,” said John Lettieri, president and CEO of Economic Innovation Group. . “PPP loans are likely to run out a few months before business in the affected sectors returns to normal operations. But there may be no further relief once this round of PPPs expires.”