The Institute for Local Self-Reliance — together with more than a dozen national and local small business organizations, which are listed below — have put forward the following proposal. Both the crisis and the federal policy response are evolving rapidly, and we expect to refine this plan as things develop. We are working closely with many other allies, including the Main Street Alliance.
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Small independent businesses around the country have seen an unprecedented collapse in revenue. The federal government must respond aggressively and quickly to keep small businesses solvent through the crisis. Doing so will prevent a surge in demand for unemployment insurance and emergency health insurance, and it will reduce the potential for a catastrophic economic depression. We are all in this together. When life returns to normal, we need small businesses to be ready to rebuild the economy and restore the vitality of our communities.
The top priority must be grants and subsidies, not loans. While expanding lending is important, it must be done in conjunction with direct assistance in the form of grants and subsidies. Small businesses crippled by debt is not a solution.
1. Grants and subsidies to bridge the crisis
Grants and subsidies, not loans, must be a priority. Small businesses need a bridge to weather this crisis, keep their staff employed, and be in a position to lead an economic recovery. Many small business owners are worried about taking on excessive debt in a volatile and highly uncertain economy. Direct cash assistance is critical to enabling small business owners to weather this storm.
a. Automatic, rapid-response grants to keep small businesses afloat
The federal government should quickly provide an infusion of cash to enable small businesses to bridge the immediate crisis. A 2016 study found that half of small businesses have a cash buffer of less than 27 days. For restaurants, the median buffer is only 16 days.
The federal government should provide grants to small, independent businesses affected by the crisis to meet immediate needs over the next 4 months, including payroll, health insurance, rent, mortgage payments, and utilities. These grants should be issued automatically to small businesses in heavily impacted sectors, including retail and restaurants. They should be delivered through the U.S. Treasury, which, unlike the SBA, has the capacity to meet the scale of this urgent need.
Other countries, including Denmark and the United Kingdom, have taken this approach, offering payroll subsidies and grants to small businesses.
Many small businesses are trying to decide right now if they should cut further losses by going out of business immediately, adding themselves and their employees to the unemployment rolls. Providing an immediate grant will give small businesses assurance so they can make the decision to stay in business.
b. Payroll subsidies
Because this crisis may extend for months, small businesses will need additional support in the form of subsidies, perhaps tied to payroll. Reimbursing small businesses for their payroll costs during this and future periods of social distancing will allow them to keep their staff intact and be ready to resume operations, and is a better long-term solution than swelling the unemployment rolls.
2. Low- and no-interest loans
The federal government should expand loan financing, including:
a. Vastly expand the Small Business Administration’s 7(a) loan guarantee program, increase the share guaranteed to 100%, and suspend borrower and lender fees. These loans should be made interest-free, with no payments for a year. The SBA should suspend the current requirement that businesses demonstrate ability to repay the loan, which is impossible to prove in today’s uncertainty. The government should implement a streamlined process with banks and credit unions to accelerate loan approvals, and should quickly set up a system for authorizing participation by banks that are not currently SBA lenders.
d. Fund Community Development Financial Institutions, local business organizations, municipal economic development offices, and similar entities to do outreach and provide assistance to small businesses in applying for grants and loans.
e. Direct the nation’s banking regulatory agencies to give banks and credit unions latitude to suspend loan payments for small business borrowers, restructure loans, and relax underwriting requirements for small businesses. Use Treasury or Federal Reserve financing to ensure banks remain solvent as they meet small business needs.
f. The federal government should provide block grants to states to fund lending and other programs that address the needs of small businesses.
3. The federal response should not exacerbate market concentration
While we recognize that large companies may require federal support during the crisis, we urge lawmakers to reject opportunism by politically powerful corporations and ensure that relief programs put money where it’s actually needed and do not exacerbate market concentration. Any bailout funds given to large corporations should come with stringent conditions to protect the public interest.
4. Suspend evictions, foreclosures, and utility shut-offs
There should be a nationwide suspension of commercial evictions, foreclosures, and utility shut-offs for small businesses. Several cities and states, including Kansas and New York, have already taken this step. It should be adopted nationwide to give small businesses basic security in the coming months.
5. Support for employees and customers
We strongly support measures to provide cash assistance, healthcare coverage, and other support to individuals. Small businesses depend on their customers and employees. Ensuring that working people can weather this crisis will be critical to the survival of small businesses and to their capacity to generate an economic recovery when it’s over. We’re all in this together.
This statement has been co-signed by the following groups:
American Booksellers Association
White Plains, New York
Derek Peebles, Executive Director
American Independent Business Alliance
Kimberley Mosley, President
American Specialty Toy Retailing Association
Mike Tucker, President and CEO
Independent Office Products & Furniture Dealers Association
Terry Schalow, Executive Director
Running Industry Association
Kristen Lavelett, Executive Director
Local First Utah
Salt Lake City, Utah
Jamee Haley, Executive Director
Lowcountry Local First
Charleston, South Carolina
Dana Eness, Executive Director
New Orleans, Louisiana
Alicia Neal, Manager
Emancipation Avenue Main Street Program
Kimber Lanning, Executive Director
Local First Arizona
Evon J. Smith, President and CEO
Kim Dreux-Kelly and Kare Baker, Executive Management Team
Think Local First D.C.
Rebecca Melançon, Executive Director
Austin Independent Business Alliance
Mary Alice Scott. Executive Director
Portland Independent Business & Community Alliance
Collin Murray, Executive Director
Dane Buy Local
Theodora M. Skeadas, Executive Director
Cambridge Local First
Jennifer Rubenstein, Director
Louisville Independent Business Alliance
Jeanne Nathan, Founder/Director
Creative Alliance of New Orleans
New Orleans, Louisiana
Amanda Converse, CEO
Love Live Local
Cape Cod, Massachusetts