Small businesses account for over 44 percent of the economy, and the novel coronavirus pandemic has effectively crushed most of them nationwide.
My bar Isaac Hunter’s Tavern in Raleigh has been closed for over a month with no reopening in sight. Zero revenue. All the same bills.
Some big businesses are fortunate: Walmart’s lines have never been longer. Parking lots are bustling at Lowe’s. In Florida, even WWE wrestling has been declared essential. But small businesses are left in the cold.
The federal CARES Act’s biggest “gift” to small businesses was the creation of the $349 billion Payroll Protection Program—but it’s already out of cash. Ironically, despite the inadequate funding, a business’s revenue didn’t have to be dramatically affected by COVID-19 to qualify. Unharmed businesses got money: internet businesses, construction companies, and even hedge funds. No wonder the program has already been bled dry.
For those lucky enough to receive funding, the loans are forgivable if at least 75 percent of the money is used to resume payroll and the remainder is spent on leases and utilities. This seems reasonable until you dig down to the details.
A business must rehire its entire workforce no later than June 30. That works for many businesses, but what about the ones that will be closed much longer? Only funds spent on payroll eight weeks after receiving funding are forgivable. The chance that bars, restaurants, and performance venues will be open at full capacity by then is extremely unlikely.
Another problem: The PPP leaves no room for the owners to take any money home. That means our landlords and employees can get paid, but we can’t. The overwhelming majority of small business owners don’t live behind gilded gates. They’re our neighbors, our friends, and our families. They have their own mortgages, water bills, phone bills, school costs, and credit card minimums to pay. Various other loan products are offered by government programs, but they aren’t forgivable and only result in more debt that many owners will never be able to repay.
To beat this virus and save lives, we must stay home, but the “lifeblood of the U.S. economy” needs true relief beyond loans and debt. Our leases are our biggest expense, and May’s rent is due in less than two weeks. Even when we finally reopen, it will clearly be at a reduced capacity for the foreseeable future. Our rents are negotiated based on the number of people we could fit through our doors. If the “new normal” means we can host only half the guests, how can we possibly pay our full rent?
I’m not in favor of reopening North Carolina until it is safe to do so. What I am in favor of is throwing the small business owners in our country a real lifeline, not just loans we will never be able to get out from under.
Our ships are taking on water, and we can’t just plug the holes with more debt. We need targeted aid that is specific to the hospitality industry. We need more relief, and we need flexibility on how to use it. We need the government to find ways to compel banks and landlords to work with their small-business tenants until we can get back to full capacity.
We need to find a way to weather this storm together.
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