- Small businesses need more aid from Congress to avoid permanent closures and severe labor market pain, a group of more than 100 CEOs wrote in a Monday letter to lawmakers.
- Though the Paycheck Protection Program provided nearly $520 billion in emergency loans, the program faces an August 8 expiration and isn't enough to keep small firms afloat, the group led by former Starbucks head Howard Schultz said.
- Lawmakers need to extend loan availability, speed up funds' delivery, and offer more emergency capital to low-income communities and people of color, according to the letter.
- "A wave of permanent closures" could materialize by Labor Day if the right actions aren't taken, the CEOs said.
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Small businesses need fresh fiscal support if they're to ride out the coronavirus pandemic and its lasting economic damage, a group of more than 100 CEOs wrote in a Monday letter to Congress.
The Paycheck Protection Program served as the leading support for small firms at the start of the pandemic, with nearly $520 billion loaned out to participating businesses as of July 24, according to the Small Business Administration. The program was initially set to expire in July before Congress extended the deadline to August 8. Now, lengthy stimulus negotiations have many fearing a major economic hit if PPP isn't renewed.
Small businesses employ nearly half of all private-sector workers and make up 44% of GDP, the CEOs said. If Congress doesn't pass more aid for such firms, the economic damage can exacerbate an already steep recession, they added.
"By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon," the group led by Starbucks' former chief executive Howard Schultz wrote. "By year end, the domino effect of lost jobs — as well as the lost services and lost products that small businesses provide — could be catastrophic."
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Federally guaranteed loans should be made available for small businesses to stay solvent through 2020 and well into 2021, the CEOs said. Participating businesses should have a wide range of uses for the borrowed capital, and the firms hit hardest by the pandemic should enjoy at least partial loan forgiveness. Funds should be delivered quickly and through infrastructure already established by PPP, the group said.
Businesses owned by people of color — who've been disproportionately affected by the pandemic — should be able to gain access to emergency loans more easily, according to the letter.
Republicans and Democrats remain locked in talks over a second round of fiscal relief. While elements such as another set of direct payments have been largely agreed upon, expanded unemployment benefits continue to divide the two parties. Republicans have pushed for a $1 trillion package compared to the $3.5 trillion bill sought by Democrats.
The coalition noted their message "is not a call for bottomless handouts," instead saying their request arrives at a "defining moment to show how capitalism can benefit all Americans."
PPP has been scrutinized for alleged inefficiencies in how it makes funds available, with politically connected ventures and large companies receiving aid and the smallest firms left without relief. Still, a study conducted by MIT and Federal Reserve researchers found the program saved between 1.4 million to 3.2 million jobs and lifted employment at eligible firms by as much as 4.5%.
An extension to PPP wouldn't be enough to lift sectors struggling the most through the pandemic, the CEOs said. If such firms are to survive until a coronavirus vaccine is available, Congress needs to widen the scope and scale of its small-business aid.
"From retailers and restaurants to consulting firms and manufacturers, small business owners are facing a future of potential financial ruin that will make the nation's current economic downturn last years longer than it must," the group wrote.
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Partner offer: If you are a small business looking for federal relief learn more about applying for PPP loans through Kabbage here.
Disclosure: Kabbage, Inc. is a partner of Insider, Inc.’s business development team, which is separate from its editorial department. We will receive a commission if you are approved for a loan through these links.
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