NEW YORK–Help in the form of federal loans may be on the way, but it will likely be too late for many small businesses, according to one new report.
While the $2-trillion CARES Act includes $350-billion in loans and support for small business, many “lack the cash to stay afloat for more than a week or two,” noted the Wall Street Journal. Many have already shut their doors.
“Small businesses account for almost half of U.S. private employment,” the Journal noted. “ A complete collapse of even some of those enterprises not only would dash the dreams of entrepreneurs and threaten the livelihoods of many, it risks sapping the power of an eventual economic rebound as the financial distress ripples through to landlords, vendors and lenders.”
Data compiled by Bloomberg indicate 50,000 retail stores have shut in just over a week across the country, putting more than 600,000 workers on furlough. As CUToday.info reported, last week a record 3.3-million people filed for unemployment.
‘Capacity Problems’
Andrew Metrick, a Yale University finance professor, told the Journal that quickly distributing the relief in the coronavirus aid package to get money in the hands of small businesses in time to keep them viable will be a challenge for the system.
“There’s a fair amount of money,” Metrick was quoted as saying. “But ultimately we have capacity problems getting the money into the hands of the small businesses fast enough, without fraud or bad actors effectively figuring out how to siphon money off.”
The Small Business Administration has been flooded with requests for financial aid, the Journal reported, noting the agency’s website has failed repeatedly, and getting the $350-billion in approved funds to small business may take longer than many had anticipated.
The Wall Street Journal cited a 2019 JPMorgan Chase Institute study that found almost half of U.S. small businesses don’t have enough liquid reserves to handle two weeks’ expenses.
‘Ringing Off the Hook’
Rob Snow, president and chief credit officer for Blue Bridge Financial, which services an $85 million portfolio of 1,900 small business loans, told the Wall Street Journal the phones have been “ringing off the hook” with requests for payment deferments.
“The calls we’re getting, they’ve already laid off their staff and they have no reserves left,” Snow said. “These were often our more responsible customers.”
The National Federation of Independent Business, meanwhile, reported it had a record 13,000 people register for a webinar it hosted on the stimulus plan and financial resources.
“After the webinar ended, more than 900 emails flooded in…business owners asking, ‘Am I going to have anything left? Will I be evicted? Will I have to file for bankruptcy? Will I be able to reopen?’” the Journal reported.