VIENNA, Virginia, March 18 — The Small Business and Entrepreneurship Council issued the following news release:
In response to the emergency coronavirus response legislation that passed March 14, Small Business & Entrepreneurship Council (SBE Council) president & CEO Karen Kerrigan said legislative and policy efforts need to focus on lifting burdens and providing relief to small businesses, and new mandates will backfire on the employees the legislation is intended to help. Kerrigan said the unintended consequences of the paid leave provision on businesses under 500 employees, and how it is structured, will lead to more layoffs and harmed workers, rather than protecting them from job loss and pay.
“The legislation is structured in a way that makes small businesses front load the cost of leave well before they receive the benefits of the tax credit. Most small businesses do not have and will not have the capital on hand to absorb the mandate, especially now with plunging revenues. So small business owners are eyeing this legislation right now and making this decision: ‘Should I lay off my employees now given the vast uncertainties, including legislation that that takes away flexibility and makes me do something with the limited capital I need to keep my doors open?’ That’s the reality,” said Kerrigan.
According to JP Morgan Chase research, 50 percent of small businesses have less than 15 cash buffer days. Obviously, these businesses are most vulnerable to the current and evolving disruption caused by the coronavirus. Kerrigan said the process for obtaining waivers for businesses under 50 employees (a provision included in the legislation) could be a burden, unless it is a blanket waiver. Small businesses are currently triaging and will not have time for waiver applications. The bill excludes businesses with 500 or more employees from the mandate.
“We support legislation that immediately puts capital into the hands of suffering small businesses so they can keep their workers. Capital is critical right now. A payroll tax holiday would be meaningful and immediate. The SBA has emergency authority to work with private lenders both traditional and online to accelerate the delivery of capital and in smaller amounts that could save many small businesses. The SBA needs to use their full arsenal of tools to effectively respond to the needs of small businesses across industries and the nation in delivering economic injury loans. Beyond these loans, Congress needs to review and quickly act on innovative solutions that spark private capital support and investment like the package recently developed by GOP members of the House Financial Services Committee. We are also working with the crowdfunding platforms to identify ways to leverage and scale up this effective way of raising capital. Thankfully, the SEC has lifted the amount that can be raised via Regulated Crowdfunding from $1 million to $5 million along with other reforms, but it will be several months before new rules are finalized” added Kerrigan.
SBE Council is also supporting Senate Small Business Committee Chairman Marco Rubio’s legislative efforts to make legislation as meaningful and powerful as possible for America’s entrepreneurs and small businesses. The group and its members are working with other members of Congress, its small business members on the front lines, and allies in the business community in developing new legislative ideas and policies to support small businesses and their employees. New mandates and tax credits, as structured within the legislation, is not a viable solution for many small businesses.
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Kerrigan in CNBC: SBA and Small Business Disaster Loans Have Never Faced a Test Like Coronavirus, March 16, 2020.
* “SBA should have the capacity to pivot to a greater number of EIDL loans,” Kerrigan said. “Of course, this all depends on volume, which will be driven by the extent of the economic damage and loan operations. They will have to evaluate their capabilities as the need for loans evolves and grows.”
* “Kerrigan said the big bank CEOs who met with Trump on March 11 pledged to keep the capital flowing to small businesses. ‘It would be nice to hear specifically how they are going to help,’ she said.”
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SBE Council is nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For 25 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth. Visit www.sbecouncil.org @SBECouncil