The biggest casualties of economic crises are small businesses. With coronavirus-induced fear battering financial markets, disrupting supply chains, and scaring away customers, American small businesses and their employees are suffering. That’s unacceptable.
The country’s 30 million small businesses, employing 60 million hardworking Americans, are the economic engine of the economy, creating two-thirds of all new jobs. They will lead the country out of this crisis. Small businesses are too big to fail.
I’m hearing from numerous Job Creators Network members that their business revenues have plummeted over the past couple of weeks. Travel and hospitality-related businesses have been hit especially hard. According to Matthew Meier, founder of the Las Vegas tour company MaxTour, “We have had a cancellation rate of more than 60 percent for our tours already this month, and we expect that to get worse. We are going to try to ride it out and keep all of our employees, however, the longer this [coronavirus outbreak] continues the harder that will be.” Rohit Arora, president of Biz2Credit, said this week that “widespread panic is setting in among small business owners nationwide across all industries.”
Good public policy can help ease the economic pain that small businesses are facing and help them weather this storm. On Wednesday, the Trump administration announced $50 billion worth of small business loans — double the traditional lending authority — that will help small employers get the funds they need to make payroll and cover bills. Yet this move is just table ante.
For the duration of this coronavirus turmoil, the Job Creators Network will fight with and for small businesses. While there is no silver bullet to fix this crisis, JCN will focus on three key policies to start which will alleviate some of the economic pain.
First, we will work to create vast new low-interest small business loans that can be taken from local banks, not the Small Business Association, whose process is bureaucratic and expensive. The interest rate on the SBA loans announced this week is 3.75 percent, which is too high given that the country is set to move to zero percent interest rates. Low-interest local bank loans — collateralized by the U.S. Treasury — would allow small businesses to quickly get the liquidity they need to operate their businesses close to normal until the country can emerge from this unique moment.
Second, we will advocate for federally-funded unemployment benefits so workers have a safety net in case they are furloughed. By taking the cost of unemployment claims off the books of small businesses, this can free up vital capital for deployment in other areas pertinent to business operations. The last thing that any small business owner wants to do is lay off employees, but in these difficult times, this step might be necessary to stay in business. Giving small employers the peace of mind that their workers will be taken care of through federal government-funded unemployment benefits will make this process easier.
Third, JCN will advocate for the proposed payroll tax holiday to be extended to employers with fewer than 100 employees. Like employees, employers also pay 7.65 percent of payroll tax on employee wages. Providing small businesses with the same payroll tax relief as employees will allow employers to keep more of their earnings to keep their businesses afloat during this difficult period. Reducing their tax burden would prevent layoffs, wage cuts, and business closures related to coronavirus’s impact. A 2010 study conducted by the nonpartisan Congressional Budget Office found that an employer payroll tax cut significantly boosts employment and economic growth.
These three measures will take some of the pressure off small businesses over this period, so they can focus on bolstering their businesses which are vital to communities and local economies. But we don’t have all the answers. JCN is looking for ideas from small businesses about how we can help them stay on their feet. We will advocate for these ideas to policymakers and do our best to make them a reality. Working together, we can defeat this economic virus.