Support for Small Businesses

Support for Small Businesses

Plan to Help Small Businesses Through the Pandemic Recession

San Diego small businesses, and businesses across the country, have been dramatically impacted by the COVID-19 pandemic. With uncertainty about being able to pay rent and with the Paycheck Protection Program funding running out before many small business owners could access it, too many have had to close their doors or lay off, furlough, or cut the hours of their employees.

Community members have rallied to support our beloved small business and their employees — buying household goods and comforts from favorite neighborhood spots, ordering take-out to support restaurants and delivery workers, and purchasing gift cards to keep small businesses afloat through the “stay at home” orders.

As San Diegans continue to support one another during this incredibly difficult time, it is abundantly clear that more needs to be done by our federal government. Additional support is needed to protect our small businesses and to keep our economic infrastructure in place, so that San Diegans can return to work as soon as it is safe to do so.

With that in mind, Sara Jacobs has developed the following plan to help small businesses through this pandemic recession. This plan has been developed through conversations with many local small business owners and will evolve as conversations continue.

Fix the Paycheck Protection Program (PPP)

The initial funds appropriated for the Paycheck Protection Program were a good start, but Congress shouldn't have allowed the application period to close in early August, before small businesses had received the support they need and while the pandemic was still forcing businesses to close. Too many small businesses, especially ones owned by women and people of color and those without long-standing relationships with banks, have been unable to receive the assistance that they need.That’s why Sara is proposing the following changes to the Paycheck Protection Program:

Make sure any small business that is eligible for the Paycheck Protection Program receives it. Small businesses should not have to compete with large corporations, or each other, to get assistance from the federal government. Any business that qualifies for a Paycheck Protection loan should be able to get it, with protections and oversight in place to ensure it goes to actual small businesses and not large, publicly traded corporations that have other methods to receive assistance. Making this a universal program is good for our small businesses, and good for our economy. To do this, we need to lift the cap on funds appropriated for the Paycheck Protection Program, and set an automatic reauthorization of the program until 30 days after “Safer at Home” orders have been lifted.

Designate at least $70 billion for Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) so that businesses that don’t have previous relationships with lenders, predominantly women and minority owned, can access the program. We also must strengthen the Minority Business Development Agency of the Department of Commerce to make sure that minority owned small businesses have access to capital so they can start and scale their enterprises and be competitive in the new economic landscape.

Allow lenders to do cash advances for their PPP loans. The Economic Injury Disaster Loan (EIDL), run by the Small Business Association (SBA), allows applicants to receive an up to $10,000 advance immediately. The same should be done for PPP applicants so that small businesses, many of which have already waited longer than they can afford to get assistance, can immediately get help. To do this, Congress should allocate an additional $100 billion to PPP specifically designated for cash advances.

Simplify the application process and rules. Unfortunately, it is too late to entirely overhaul the implementation of PPP, but the process should be simplified so that the businesses most in need, and often the smallest, can figure out how to apply. Complex application processes benefit large institutions that can afford expensive compliance lawyers to wade through over-complicated legalese. Additionally, I’ve heard from many small business owners that got funding, but are unsure of how they can use it because the rules are complicated and ambiguous. Under current rules, businesses have eight weeks from the day they receive funds to spend it, but many are worried that they may re-hire workers now, only to run out of funding to continue paying them before the “Safer at Home” orders are lifted. Congress should direct the Department of Treasury and the SBA to simplify and clarify the rules of the program, and change the time frame for spending to eight weeks after the mandatory closures have been lifted — to allow small business owners to make decisions that reflect the realities for their businesses.

Provide assistance in a way that preserves as much small business infrastructure as possible

Sara knows the importance of keeping small businesses intact as we move towards thinking about a sequenced re-opening of the economy. That’s why she’s advocating to:

Use restaurants to address food insecurity. There are millions of restaurant workers — trained in food safety — and restaurant food distribution networks going to waste all while food banks, grocery stores, and traditional assistance programs are being stretched beyond their capacity. As a result, too many Americans are going hungry. There are a number of innovative programs that are trying to solve these dual challenges — most notably the State of California’s “Great Plates Delivered: Home Meals for Seniors” program and Jose Andres’ World Central Kitchen. Congress should fund and scale these programs nationwide, and instruct federal agencies to do an assessment of what regulatory waivers are needed to make this possible at scale.

Invest in child care infrastructure. Many essential workers are in need of child care that they are unable to access, mostly due to the cost of additional hours needed with school closures. At the same time, child care providers are struggling to remain open and financially solvent. Congress should allocate $50 billion to subsidize child care for essential workers, and help keep the child care infrastructure intact through this crisis. Working parents will not be able to fully return to work if child care is not available, so this is an important component of our ability to re-open. Locally, San Diego for Every Child has helped mobilize more than $6 million for child care for essential workers — working with Child Development Associates (CDA) and the YMCA to get resources to existing, already-licensed child care providers. Efforts like this should be funded and scaled across the country.

Prioritize small businesses in government procurement. While the federal government already has quotas of small businesses contracted with for its procurement, it can do much better. During this difficult time, government procurement should additionally prioritize small businesses.

Set up protections for the next emergency

Set up a National Business Interruption Risk Insurance Program. Sara recognizes that while pandemics are rare, when they do happen, the consequences for small businesses can be catastrophic. That’s why she supports creating a National Business Interruption Risk Insurance Program, similar to the Terrorism Risk Insurance Act (TRIA) that was passed after 9/11. This would be a federally guaranteed Business Interruption Insurance program for small businesses, that would complement existing privately held business interruption insurance programs, which usually only covers direct physical loss.

Make a paycheck protection-like program permanent. Part of why the Paycheck Protection Program was so difficult to implement was because the Small Business Administration (SBA) did not have the capacity to administer it and had to go through banks, which was both clunky and resulted in an inequitable distribution of loans. To enable a program like this to be more effective the next time it is needed, it should be set up as a permanent, automatic program that is triggered when a certain level of unemployment is reached. That way, the SBA can set up an administrative process in advance that will be able to immediately spring into action, instead of creating one on the fly in the middle of an emergency. This will also enable small businesses to have confidence that the federal government will help them in an emergency situation, which allows them to better plan.

Stimulate demand

We have not seen contractions to our economy like this since the Great Depression. Sara knows that in addition to ensuring we have small businesses able to weather the crisis and re-open, there needs to be demand for goods and services.

Pass another stimulus package of a similar size to the CARES Act. Sara believes that while the CARES Act was an important package, it was really a stabilization package — designed to help families and our economy get through this shelter-in-place period when it was necessary for public health for most business to cease. We need to pass an additional stimulus package of a similar size to stimulate demand and enable our economy to recover from this period — which must include additional direct cash assistance to families.