On March 24, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), or “Phase 3” of the federal government’s stimulus packages aimed at keeping Americans working and businesses afloat during this pandemic. While the loan assistance provided in the package is a worthy first step and may help some small businesses continue to stay open and keep their employees, we are concerned that tying loan forgiveness solely to payroll may not help enough businesses from going under when their revenues have dropped to zero overnight. Moreover, we are now seeing that the current emergency loan programs are far too complicated and certainly not fast enough to help small businesses that are making tough decisions about their futures right now.
With the economy in free fall and uncertainty gripping communities across the country, businesses on Main Street have been left to grapple on their own with how to stay afloat during these challenging times. Hundreds of thousands have closed up shop, experienced dramatic losses, been forced to lay off staff en masse, and are left to wonder if they will ever reopen. Our network of more than 60,000 small businesses have painted a dire reality of what they are facing, requiring additional bold action.
The efforts this week to potentially add additional funding to the emergency loan programs are well-meaning, but would only add to a fundamentally flawed program. Small businesses need more immediate relief now. This is why we’re calling on Congress to provide $600 billion in additional direct relief to small businesses.
Immediate grant relief to small businesses
We urge Congress to allocate $600 billion in direct grants to small businesses to cover payroll and operational expenses, in addition to any new funds provided to emergency loan assistance programs. For small businesses that are unable to maintain payroll, or have operational costs that exceed the cost of payroll, there must be access to this type of grant funding because currently there is none. This significant funding ensures that a pool of money is available for small businesses while avoiding the many problems with the current convoluted Paycheck Protection Program (PPP). These grants would be administered through the IRS using a simple application:
• To cover small businesses with up to 100 employees, including the self-employed.
• Pay businesses to cover four months of actual payroll up to $20,000 per employee ($60,000 annual salary). This calculation would be based on one-third of their annual 2019 payroll, and for those businesses that did not exist in 2019, would be based on 133% of their January-March 2020 payroll (four-months equivalent). All amounts granted would be reduced by any forgivable loans received under the current PPP program.
• Pay businesses an additional amount of up to 10% of annual gross receipts (30% of four-months gross receipts) to cover any legitimate operational expenses (including additional payroll) over a four-month period at the small business’s discretion. This calculation would be based upon 2019 gross receipts, and for businesses that did not exist in 2019, the maximum amount would be 40% of gross receipts for January-March 2020. All amounts granted would be reduced by any grants received under the current EIDL program.
Other critical measures to provide immediate relief to small businesses
• To the extent that the PPP program is used to facilitate its intended purpose and the proposed grants program, ensure that a minimum of $100 billion in PPP funds are set aside for community-based financial institutions such as Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), USDA rural development programs, and other programs that provide assistance to businesses in underserved communities, particularly women andminority-owned businesses.
• Remove the (iv) Waiver of Affiliation Rules under Section 1102 of the CARES Act defining which businesses should qualify for the PPP. This program should prioritize truly small businesses so that larger companies and private equity-financed firms do not dry up the program’s funds.
• Ensure true small businesses are tapping into PPP funds by revising language to limit program eligibility to businesses with no more than 500 employees total at all locations (instead of less than 500 employees per location as currently written).
• If the recommended direct grant programs are not enacted, establish a program that would pay employers to maintain healthcare for employees they had to lay off or furlough. Include a provision allowing furloughed employees to stay on their business sponsored health plans during the COVID-19 emergency.
• Provide forbearance on all small business loans, including credit card payments for at least six months. The stimulus package provided a six-month loan forgiveness for SBA loans, which is a great first step, but we must ensure that small businesses with other forms of debt are supported.
• Adjust repayment due dates on property taxes and commercial rent to give small businesses the flexibility they need to stay afloat.
• Pass legislation that would ensure business insurance companies cover COVID-19 revenue losses.
• Ensure small businesses that offer paid family medical and sick leave receive cash reimbursement, instead of having to wait for a quarterly tax reduction or an annual tax credit.
• Ensure the small business tax provisions of the CARES Act can be taken in conjunction with any grant/loan assistance like the PPP.
• Pass a moratorium on increasing unemployment insurance (UI) rates so that small businesses do not have to pay higher premiums next year as a result of COVID-19.
Access to responsible credit
We urge state and federal officials to identify creative ways to enable responsible access to credit. This includes guaranteeing that all small business loans and grants are widely accessible and that the application process is simple and speedy.
• Ensure all SBA loans and/or grants awarded to small businesses are efficient and immediate so that small businesses are not receiving loans months after an application is submitted.
• Reauthorize the State Small Business Credit Initiative (SSBCI), which can deliver flexible, affordable capital via the states to small businesses across the country.
• Expand the CDFI Fund to $1 billion to ensure an infusion of loan dollars that CDFIs can start disbursing into their communities now, particularly for disadvantaged and rural communities.
• Guarantee that all small business financing products are unrestricted so small businesses are able to use the loans to provide employee benefits, pay wages, pay taxes, make telework arrangements, pay rent, refinance existing debt, and more.
• Pass legislation extending Truth in Lending Act disclosure requirements to small business loans or credit products so that small businesses struggling with cash flow are not taken advantage of during this pandemic. Such legislation would ensure more transparency and fairness in small business lending products, as we’ve recommended in the Small Business Borrowers’ Bill of Rights.
For additional policy recommendations to support small businesses impacted by COVID-19, visit
© 2020 Small Business Majority 2 April 13, 2020