US small business

About 30 million unemployed Americans are now on tenterhooks waiting to see if the $600-a-week federal unemployment benefit created by the Cares Act will be renewed. As the political row over its efficacy and necessity continues, the House and the Senate remain far apart on a compromise.What shouldn’t be left out of the discussion is an unlikely, yet numerous, group of people who do support the added benefit: small business owners.The issue is complicated.Many I know in the business community have taken issue with the additional $600 federal payment. They complain that a great number of their workers – particularly hourly and part-timers – have avoided returning to the workplace because the benefit provides them with more compensation then they were getting at their job and merely incentivizes them to stop working.But some studies – like this one from a group of Yale University researchers – have found the opposite to be true. The study found “no evidence” that workers receiving the added federal unemployment benefit were disincentivized to work and that “people with more generously expanded benefits also resumed working at a similar or slightly quicker rate than others did”.However, as the Wall Street Journal points out, the study excluded part-time workers and other “short-termers” who make up the vast majority of employees that benefited the most from the federal bump. “A worker in Louisiana who made $2,400 from part-time jobs all of last year would collect $2,516 a month in jobless benefits today – $29 a week from the state plus the $600. An average worker who had made $17 per hour ($680 a week) in Ohio has been able to collect $940 each week with the federal boost.”The debate will continue.But many small business owners remain convinced the payments should continue. Why? Because it has provided a safety net for their employees during a time when their companies couldn’t pay wages due to the country’s self-inflicted economic collapse.“We want them to succeed, and we want to help them grow their careers, and we hope to continue to employ them well into the future,” Mark Frier, a restaurant owner in Vermont told NPR’s Marketplace. “Initially [the federal benefit] was a lifesaver.” Frier is just one of many business owners who have been unable to sustain employee wages – even with help from the paycheck protection program – and who are grateful that there’s an added federal benefit available to help them through these times.Julie Wineinger, the owner of Lulabelle’s Sweet Shop in Washington DC, has gone out of her way to assist her employees in applying for unemployment benefits. She has also run fundraisers – selling ice cream and other products – specifically to raise additional cash in order to help her staff through these difficult times. “Some of my employees are very young, some have to support families,” she told me in a podcast interview. “They didn’t ask for this and I’m going to do my best to do what I can for them.”One of the many benefits of working for a small business is that employees oftentimes develop close relationships with their employers. When bad things happen – a family illness, a financial problem, a global pandemic that causes an unprecedented economic downturn – many small business owners are as much concerned with their employees’ welfare as their own families. Because they are like family.But these same employees are also assets, which is why many small business owners I know are in favor of the additional federal unemployment benefit. Knowing that the benefit is there, they could furlough their staff and not terminate them. Without these checks, those employees who have worked for them for years and gained experience and knowledge of their businesses may be forced to move elsewhere or take other jobs in order to make ends meet. When that happens, small business owners like Wineinger and others lose good people and have to search and train replacements. That creates disruption and added costs.Maybe the added federal benefit does discourage some from going back to work, particularly part-timers and hourly workers. And it is true that many small businesses are finding this situation a frustrating obstacle towards rehiring and getting back to normal. But for many other small business owners, that additional $600 check every week has helped them retain and sustain their employees during an unprecedented national emergency until times – hopefully – get back to normal. More

The Republican-controlled Senate released its proposal for further aiding small businesses during this unprecedented downturn caused by the coronavirus pandemic. Of course, the seven-page detailed outline released by Senator Marco Rubio’s office will probably be different in the bill’s final form. But let’s hope not too different. That’s because it offers up at least three big things that will significantly help many struggling small businesses. Here they are:Loans under $2m would basically be forgiven, with some caveatsIf your business received a PPP loan for less than $150,000 you would no longer be required to go through the forgiveness process. You would have to represent that you made a “good faith” effort to comply with the loan requirements and you would be required to retain the relevant records needed for at least three years, as well as being asked to complete and submit certain demographic information. If your business received a loan for less than $2m you would still have to complete the application along with maintaining records for three years and submitting demographic information. But you won’t be required to submit the documentation. The government will retain its right to audit you.For countless small businesses that means a significant amount of effort (and professional fees) saved filling out applications. For small business owners like me – many of us who would have been eligible for full forgiveness – this would mean spending much less time doing bureaucratic administrative work and more time that we can devote to running our businesses.More expenses would be eligible for forgivenessJust because the loans, in my estimation, are “basically” forgiven that doesn’t mean that you’re still not responsible for certifying that you’ve met the forgiveness requirements and are keeping the necessary documentation just in case you’re reviewed. Even so, the forgiveness rules have been made easier because, although it’s still required that 60% of the costs eligible for forgiveness are payroll-related, more non-payroll expenses are considered eligible to be included in the other 40%.In addition to rents, mortgage interest and utilities, these eligible expenses now include payment for any software, cloud computing, and other human resources and accounting needs, costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance, expenditures to a supplier pursuant to a contract for goods in effect before 15 February 2020 that are essential to the recipient’s current operations and the cost of personal protective equipment and adaptive investments to help you comply with federal health and safety guidelines related to Covid-19 during the period between 1 March and 31 December this year.All of this expands the definition of forgivable expenses and I would be hard pressed to find a small business that, given these new rules, wouldn’t be eligible for full forgiveness.There will be more PPP loans availableThe government would put aside another $190bn for this round of PPP loans and even if you received one before you may still be eligible to receive a second loan. However, you would have to meet new requirements. For starters, your business would only be allowed to have fewer than 300 employees (not 500 as was previously required). More importantly, you would also have to demonstrate that your gross receipts in the first or second quarter of 2020 was at least 50% less than the same quarters in 2019. Publicly held companies, some financial services firms and Chinese-affiliated companies would be excluded and total loans, including the first round of PPP, would be capped at $10m.Some industry groups are arguing that the 50% revenue decline benchmark is too high. But for many business owners – particularly in the restaurant and retail industries – meeting that requirement would (unfortunately) not be a problem. There are a few other goodies too. For example, small businesses who believe they are eligible for higher loans than what was initially approved would be allowed to work with their lenders to alter their original loan value regardless of whether the loan had been fully disbursed. Requirements for smaller lenders and farm credit system institutions have been eased. Chambers of commerce, lobbying and other quasi-government organizations may now be eligible for funds and the rules for seasonal and businesses in low income areas have been clarified and, in some cases, relaxed.The PPP program has never, and never will be, perfect. Not everyone will be satisfied. But since the very beginning of the pandemic, Congress has taken significant actions to provide aid to the many struggling small businesses across the country and these latest changes are a continuation of those efforts. Yes, I’m concerned about the impact these multitrillion-dollar stimulus programs will have on our future fiscal growth. But for now, these actions are critical to sustain the small businesses that are the backbone of this country’s economy. More