In the American Prospect, ILSR Co-Director Stacy Mitchell explains the unprecedented economic crisis that small businesses are now confronting, particularly if the federal government doesn’t respond promptly and comprehensively.
Small businesses are in free fall. Shuttered by the pandemic, local retailers and restaurants have seen sales plummet, in many cases to zero. During every other major disaster in memory—the financial crisis, 9/11, the Great Depression—these sales dropped, but they did not flatline. Main Street businesses are looking into an abyss and it’s not at all clear how far it is to the other side or how they can possibly build a bridge to get there. Most have only enough cash reserves to survive for a few weeks.
Mitchell argues that, as Congress negotiates how to help small businesses dealing with a sudden and catastrophic loss of income, burdening them with more debt through loan assistance is not the solution. There are much more viable options for helping small businesses get back on their feet.
Instead of offering loans, some members on both sides of the aisle have put forward proposals to provide small businesses with sizable grants to cover payroll for the next few months. Republican senator Marco Rubio has a bill that would allow small businesses to borrow from the Small Business Administration (SBA), but any portion of the loan they spend paying their existing staff during a four-month period between March 1 and July 1 would be forgiven.
On the Democratic side, Senators Chris Murphy, Jeff Merkley, and Chris Van Hollen have offered a broadly similar plan, but with a few key differences. In addition to payroll, their proposal would cover rent and health insurance for small businesses, and it would be administered by the Treasury Department, which some believe is better equipped than the SBA to quickly scale a program of this size.
See our proposal — together with more than a dozen national and local small business organizations.
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