“ Small businesses employ half of the U.S. private-sector workforce and create two-thirds of all net new American jobs. ”
From plunging revenues to shuttered storefronts, it’s no secret that the COVID-19 public health crisis has driven too many small businesses to the brink of collapse. An estimated 100,000 small businesses across the country have already closed their doors permanently. And Black business owners, who largely run sole proprietorships or small businesses, have declined by 41%.
As the U.S. economy begins to reopen, it’s critical that policies are enacted to bolster Main Street’s recovery and long-term success. For small-business owners, that means more immediate cash assistance through grants and direct payments to individuals.
More American jobs are created by entrepreneurs than any other way — small businesses employ half of the U.S. private-sector workforce and create two-thirds of all net new American jobs. That’s 60 million individuals who depend on small businesses for their livelihood. In lower-income communities in cities and towns across the country, small businesses are especially vital to the local economy.
The pandemic’s impact on the small business community has been front and center during the crisis. Importantly, this emergency has exposed fundamental inequities in our economy that favor large, politically-connected corporations over the Main Street businesses and solo enterprises that drive our economy.
Congress initially took some steps to address these needs by funding emergency small business loan programs, but it is not enough to ensure businesses recover, and has left too many behind. The retail, hospitality and food service industries which account for 65% of job losses, received only 9% of approved Paycheck Protection Program (PPP) loans during the first round of lending. And of the Latino and Black-owned businesses that applied for PPP loans, only 12% received the amount they asked for.
These loan programs are slow, inefficient and convoluted — which is likely why more than $100 billion still remains in the PPP after Congress allocated additional money to the program. And for those who have received a loan, the guidelines have been so unclear and changed so many times that some business owners are afraid to use the money in case a misstep forfeits their chances of loan forgiveness.
“ Government should allocate $600 billion in funding for small businesses, plus monthly direct payments of $1,200 for individuals until the economy recovers. ”
To survive the immediate crisis and beyond, small businesses need immediate cash assistance, through grants and direct payments to individuals that allow people to spend money in the ways they need. The U.S. government should allocate $600 billion in funding for direct grants to ensure that a pool of money is available for small businesses while avoiding the many problems with PPP, plus monthly direct payments of $1,200 for individuals until the economy recovers.
For small business owners, individual direct payments can be a lifeline. In a recent survey, more than half of small business owners said they wouldn’t be able to operate beyond three months during the current crisis. Direct payments would allow business owners to reinvest back in their businesses and support business owners and their families when revenues don’t generate enough to draw a salary. Direct payments are also an effective stimulus, putting money back in the pockets of consumers to be able to spend at small businesses as they begin to open back up. It’s no surprise that almost 80% of small businesses support direct payments to individuals.
While the small business loan programs funded by the CARES Act may be helping a select few small businesses, the U.S. economy will not stand a chance of recovering if Congress doesn’t immediately provide direct cash assistance through grants and direct payments that small businesses desperately need while our entire society is on pause. We must prioritize policies that ensure small businesses can recover and be better positioned to withstand the next crisis. Direct cash assistance can help do just that.
David Chase directs Small Business Majority’s outreach and engagement teams across the nation in their work organizing and engaging small business owners. He also directs Small Business Majority’s state policy and advocacy and the organization’s national and state healthcare policy work.