The billions of federal dollars that have been or might be earmarked to help small businesses survive the Covid pandemic may provide needed assistance to some companies, but not enough to others. Unfortunately, the businesses and organizations that do manage to get through this worsening coronavirus crisis will then face another challenge—trying to recover and put the crisis behind them as soon as possible.
For some small business owners, the financial assistance they’ve received from the government can be both a blessing and a burden.
Carrie Jeroslow owns the Elkin Creek Vineyard in North Carolina. “We were hard hit by the pandemic, since a big part of our business structure relies on weddings and events,” she recalled. Although they received a loan from the Small Business Administration that helped them stay afloat,”…we now have a very sizable loan that needs to be paid back. I feel this will greatly affect our ability to recover from the past year.”
She thinks “…Biden should forgive these loans—if not the whole amount, a portion of it. As it stands, we will be paying this loan back for many, many years while trying to rebuild our business into the thriving destination it once was.”
More Help Needed
According to a December survey by the U.S. Chamber of Commerce, “Most small businesses see the need for further government support to see them through the pandemic’s negative impact. A majority (56 percent) disagree that they have all the support they need from the federal government for their business to succeed.”
For some companies, recovering from Covid-19 could be even more difficult given their weakened condition. In a research study conducted last month by the Small Business Administration’s non-profit SCORE association, 48 percent of business owners said they were not profitable in 2020 (compared to 25 percent the year before); 68 percent had to reduce employee hours/pay or furlough or permanently lay off workers.
MORE FOR YOU
The need to re-pay government loans can weigh heavily on the minds—and finances—of business owners. But there are ways the government could lift or lighten the burden.
Patrick Hardy is CEO of Hytropy, a small business disaster management firm. He noted, “Small businesses run on a very different revenue timetable than their larger counterparts. Recovery times have lagged and will continue to do so in proportion to the vaccine rollout, as vaccination rates will likely dictate reopenings for companies in hospitality and other [industries] requiring significant interpersonal contact with customers.
“Paying back existing loans will be a big question mark in Q1 and Q2,” he observed. “The Biden administration should immediately create a 6-12 month additional forbearance, which is preferable to providing more PPP and opening the federal coffers again.”
Forgive or Reduce
“President Biden, through the SBA, should institute a loan forgiveness/reduction plan immediately for all SBA-backed loans,”suggested Graciela Tiscareno-Sato, the creative officer and publisher of the Gracefully Global Group, a bilingual education and digital courses company.
She said, “The six month [mortgage] forbearance put in place in 2020 was a nice start, proving [the government] can do it. To lift the immense burden of loan payment obligations when revenue disappears for the long term, I’m advocating for a significant, permanent reduction in our principal balance.
“Business owners need true forgiveness due to our inability to generate pre-pandemic revenue levels [and] revenue flow that was used to qualify us for the loan and repayment schedule. Additionally, [Biden] could direct other lenders who funded small businesses in the same crisis to forgive or reduce all working capital loans.”
Extend Tax Deadlines
The pandemic has impacted the ability of some small business owners to pay their taxes—and in some cases the ability of the federal government to process tax returns.
Hardy noted, “The IRS is significantly behind in processing and posting tax returns, which has created a big headache for small business owners who may not know what they owe for even their 2019 returns. For example, the IRS office in Fresno, California at the start of the pandemic literally sent everyone home with no notice.
“This created a massive backlog that is making it difficult for small business owners to operate normally because processing of routine forms is taking an extended period of time. The administration should do what the previous one did and extend the tax deadline for small business owners,” he recommended.
More Education And Expertise
Small business owners may not have started their companies knowing everything they should about running a successful enterprise, and getting money from the government may not solve all of their pandemic-related problems. More education could provide the long-lasting help they need.
Octavia Conner is CEO of Say Yes to Profits, which provides virtual CFO services. She said, “…the current loans provided to small businesses will only place a Band-Aid on the deeper financial problem many businesses face. I believe President Biden needs to encourage or require that each business owner that is approved for a loan should complete a financial management course.
“This course should provide strategies on how to build their business to thrive regardless of future economic disasters and business slow seasons. The course could map out how to make the funds last longer than normal and use them to further scale the business.
“In addition, small businesses should receive a complimentary counseling session for 30-minutes with a financial expert that could answer their financial management questions and possibly direct them to an accounting firm for assistance,” Conner said.
Setting New Priorities
Depending on the nature and extent of a crisis, it can be necessary to prioritize who to help first and how limited resources are used. Although the government can print as much money as it wants or needs, business owners should not expect Biden to give them blank checks.
Not All the Same
Paul Sundin, a CPA, tax strategist, and CEO of Emparion, said, “… most important step this administration should take is to really identify which businesses have been affected the most.
“When we talk about the crisis, we always talk about small businesses as one collective unit when the truth is not all small businesses have felt the loss in the same magnitude. Some were able to pivot and even still gain profit and some really went down and closed.
He said, “While the proposals and plans of the administration are really promising, the execution can prove to be challenging and identification of the beneficiaries, to start with, is a complicated process that needs to be undertaken with utmost care and accuracy.”
Craig Kirsner, president of Stuart Estate Wealth Planning Advisors, said small businesses should be given priority in the Paycheck Protection Program (PPP). “It was very unfortunate that the first PPP program allowed companies to receive up to $10 million. How does that qualify as a small business? Biden should dedicate new PPP loans to businesses with 50 employees or less, true small businesses, and allow for more generous loans to allow businesses to cover capital costs and employee costs.
“Additionally, they should provide federal funding to states for them to invest in new businesses that are located in parts of the country that typically do not attract significant equity investment. [The government] should also put special focus on women and minority-owned businesses who have been hit especially hard during the Covid crisis,” Kirsner said.
New Tax Breaks
Providing small businesses with new tax breaks now could be another way to ensure they are better prepared to bounce back from the coronavirus crisis.
Stephanie Scheller, the founder of Grow Disrupt, said, “…the best two steps President Biden can take to help small businesses come out stronger on the other side is to create some small business specific tax breaks, and open doors for small businesses to remain open.
“The constant fear of whether there will be enough cash to pay taxes or if everything will be shut down again tomorrow, creates added stress and anxiety while prohibiting small business owners from being able to plan for the future.”
She said, “Too many small businesses aren’t planning cash correctly and spend money as it comes in, expecting to pay taxes out of the next batch of money. But with the current situation, there is no guaranteed next batch of money. I personally know businesses that have had to shut down because they couldn’t afford the upcoming taxes and [also] pay the rest of their bills.”
The Next Crisis
Whatever small businesses need to get through the pandemic and recover from it, they should list those needs in their crisis management plans. The sooner those needs are met, the sooner business owners will be ready to ride out the rest of this crisis—and prepare for the next one.