Relief programs for small businesses spin up - Crain's Detroit Business

Relief programs for small businesses spin up - Crain's Detroit Business


Relief programs for small businesses spin up - Crain's Detroit Business

Posted: 28 Mar 2020 09:04 PM PDT

Help from entities big and small is now making its way to Main Street businesses across Michigan.

Beyond the $2 trillion stimulus plan signed late last week, the state, Southeast Michigan municipalities and entrepreneurial support entities are pushing forward with their own programs aimed to throw a lifeline to small businesses.

Michigan's economic performance had already been softening in recent months and the sudden halt of basically everything in the state with the exception of a handful of "essential" services such as grocery, pharmacies and delivery services has put the state into a tailspin.

Unemployment claims spiked sharply for the week of March 15-21, before the stay-at-home order by Gov. Gretchen Whitmer which declared most businesses "nonessential," with 127,810 claims. By comparison, the worst week of unemployment claims during the Great Recession came in January 2009, when 77,000 people filed for unemployment.

"The shocking number of unemployment claims this week underline the risk of a corona-depression," said Patrick Anderson, CEO of Anderson Economic Group in East Lansing. "We estimated last week that 104 million workers would lose income in the next 45 days; a good number of them already have."

Small business experts, however, expect to see changes once the fog of coronavirus lifts, and they're concerned that there's likely to be gaps in the various programming intended as support.

"I'm afraid that businesses ... are going to get missed, and it's going to change the overall character of what the marketplace looks like," said Brian Calley, president of the Small Business Association of Michigan. "When it comes back, it won't look like it did before. And the part — and we're trying to make that not the case — that might look different is fewer small businesses. That's job number one for us."

The good news: small companies will have plenty of programs to tap into. Most of the new resources available to business owners can be used for typical costs of doing business, such as rent, payroll and utilities.

The Michigan Economic Development Corp., the state's top business attraction and marketing agency, on Friday formally launched the application process for its Michigan Small Business Relief Program. The program has two components: a $10 million fund for loans and a $10 million fund for grants.

The grants of up to $10,000 would be for companies with 50 employees or fewer; and the loans of up to $200,000 would be reserved for companies of fewer than 100 employees.

The program aims to boost up 1,100 businesses, particularly "Main Street businesses" in both urban and rural areas of the state, said Josh Hundt, executive vice president of business development at the MEDC. The economic development organization plans to begin deploying funds by April 1.

"What we see is this program being a tool to support 1,100 of the hardest hit companies across the state," Hundt said. "And (to) be there to complement all the other programs and services, both that were already in place and new tools that are coming on across all levels of government."

Leaders in Michigan's second-largest county announced a $3 million small-business stabilization fund late last week with $1.15 million in seed funding from the MEDC. Applications for funds begin this week and will target a variety of small businesses, particularly those that have been deemed "nonessential" by Whitmer's order and forced to close.

"It's all of those companies that have been identified in executive orders that are not part of the critical infrastructure that we're looking to provide for," said Sean Carlson, deputy county executive for Oakland County.
Additionally, the county plans to use $700,000 of the fund "to encourage companies to shift their manufacturing capabilities to the manufacture of personal protective equipment for hospitals and health care workers such as face masks, gowns and other needed items."

Doing so could move many companies from the nonessential category to essential.

Companies can apply at Oakland County's COVID-19 website.

The state's largest county has partnered with Detroit-based TCF Financial Corp. on a $6 million low-interest loan fund. Businesses can receive between $5,000 and $50,000 to be used on things such as payroll, rent and utilities.

Interested companies can apply on TCF Bank's website.

"Our goal is to strengthen the small businesses in the communities that are really struggling," TCF Executive Chairman Gary Torgow told Crain's last week. "Putting together this loan fund will give us the opportunity to quickly and as easily for a customer as possible to get these dollars out into the community so that small businesses that are struggling in the county will be helped as quickly as possible."

The MEDC is also looking to support Wayne County and City of Detroit businesses via a $1.6 million fund done in partnership with the Detroit Economic Growth Corp. (DEGC), as Crain's reported on Friday.

Similar to metro Detroit's two other major counties, Macomb County announced last week that it would partner with St. Clair Shores-based First State Bank to provide business relief to companies disrupted by COVID-19.

The county will use $800,000 in MEDC grants and up to $100,000 in matching funds from the bank.

"Local and small businesses across Macomb County have already felt the impact of this COVID-19 crisis — whether this means shutting their doors or laying off employees," Vicky Rad, director of Macomb County's Planning and Economic Development, said in a statement. "Our goal with this effort is to make sure they have the funding necessary to get through this period of uncertainty so they can remain open or reopen in the future and provide services and employment opportunities for our community."

A conglomeration of partners in Washtenaw County has joined forces to provide relief for small businesses there.

Ann Arbor Spark, the Greater Washtenaw Region Small Business Development Center, Washtenaw County Office of Community and Economic Development and the Entrepreneurship Center at Washtenaw Community College have collaborated to create the Washtenaw Small Business Resiliency Fund. The fund will provide working capital grants of up $2,500 to small businesses.

Spark said it would be working with the MEDC to secure additional funding to lend support.

TechTown Detroit, a business incubator program located in the New Center neighborhood spent last week gathering about 400 applications for its Detroit Small Business Stabilization Fund.

The first round of applications closed last Friday afternoon and TechTown President and CEO Ned Staebler said the organization was teeing up about $600,000 to begin sending out to small Detroit neighborhood businesses by either last Friday or as late as April 6, depending on banking issues.

"We are trying to make things as seamless and easy so businesses know where to go," Staebler told Crain's last week, adding that beyond financial support many small businesses are also seeking more practical support and advice about what they should be investing in at the moment and how to navigate the unemployment insurance process.

While the first round of support has closed, Staebler said he's in constant contact with other business support programs such as Detroit Economic Growth Corp. and the New Economy Initiative on further rounds of support.

The "big kahuna" for small businesses, according to Calley with SBAM, is the more than $2 trillion federal response that President Donald Trump signed on Friday afternoon.

The legislation contained significant money for large businesses like airlines and automakers, but also $377 billion that would provide eight weeks of cash flow assistance and help for small-business owners to maintain their payrolls.

Those who are approved and do maintain their payrolls can use that portion of their Small Business Administration loans to pay rent, mortgage and utilities and have that portion of the loan forgiven, retroactive to Feb. 15, according to a memo from the office of U.S. Sen. Marco Rubio, a proponent of the provision.

"This is a very big deal," said Calley. "In terms of the scope, it's impossible to know whether it's enough for small business. But I also know that it's unusual for there to be explicit small business support."

Once signed into law, as is expected, the federal Small Business Administration and SBA-approved lending institutions could begin approving loans within a matter of days and have funds to small businesses within about 30 days, according to Romualdo Ancog, the Michigan district manager for the SBA.
"This is pretty fast," Ancog said on a conference call last week.

Crain's Detroit Business Senior Editor Chad Livengood contributed reporting.

How Nice! Ransomware Makers Say They Won’t Target Hospitals…And Other COVID-19 Small Business Tech News - Forbes

Posted: 29 Mar 2020 04:16 AM PDT

Here are five things in technology that happened this past week and how they affect your business. Did you miss them?

1 — Ransomware operators want to do their part and promise to not target hospitals.  

According to information released by BleepingComputer this past week, certain hackers are swearing to spare healthcare institutions and other related organizations in an effort to ease difficulties during the COVID-19 pandemic. While some ransomware operators are already taking advantage of the havoc in the healthcare industry due to the coronavirus, groups such as Ako Ransomware, PwndLocker, Maze, and DoppelPaymer are among the few who have committed to staying away from healthcare. Additionally, private cybersecurity organizations   —such as Coveware and Emsisoft — are providing ransomware negotiation and decryption services free-of-cost to healthcare providers who may find themselves victims of a ransomware attack. (Source: Android Central)

Why this is important for your business:

A few questions come to mind. For starters, if we already know the names of groups of like Ako Ransomware and PwndLocker then why aren't they being shut down? Also, why just hospitals? Why not any firm working on treatments for Coronavirus? And since when did the makers of Ransomware get so philanthropic? More importantly for small businesses: more people working from home means more exposure to ransomware and other malware. Talk to your tech people now and make a security plan.

2 — Apple plans to reopen U.S. stores in April, following Trump's guidance.  

Apple announced this past week that they are hoping to reopen their stores sometime in the beginning of April. The announcement was made after President Trump shared that he aims to re-open the U.S. for business by the time Easter comes around. Apple's announcement was made through a memo from the retail chief and detailed that their current work-from-home processes will continue until the 5th of April —at least —and that they will then revisit the current policy week-by-week depending on where workers are located and how greatly those areas are still impacted by COVID-19. Instead of opening all of the U.S. stores at the same time, Apple plans to ease into opening their brick and mortar stores by staggering which locations open first. (Source: Venture Beat).

Why this is important for your business:

I trust the strategic decisions of tech firms like Apple, Microsoft and Amazon more so than what I'm hearing from many politicians. When these tech firms are getting back to business, I'll feel comfortable getting back to business. And so should you.

3 —Monitor, keyboard, and mouse sales have jumped as Coronavirus forces remote working.  

Due to the COVID-19 outbreak, sales have increased dramatically for keyboards, mice, and monitors as companies hustle to try and figure out how to keep their businesses afloat by having employees work from home. During the week of March 8th, double the amount of IT monitors were purchased by Britons than the week before. As compared to the same week last year, sales have gone up by 132.3% by value and 133.9% by volume, while PC sellers share that sales have also increased as businesses work to provide the opportunity for as many employees to work from home as possible. The purchase of keyboards and monitors also increased that week, growing 68.8% year-on-year. (Source: ZDNet)

Why this is important for your business:

Don't you have boxes of old mouses, keyboards and monitors stored in some supply closet somewhere? Now's the time to bring it out. Otherwise you'll need to reconsider your tech budgets for the unexpected purchases of these necessities.

4 — Verizon is giving customers extra mobile data to deal with COVID-19.

Verizon has announced that it will be providing small business and consumer customers an additional 15GB of LTE data speeds each month to add to their plans without having to do a thing. This extra mobile data will be available to all users, no matter what kind of device they have or whether their service is prepaid of subscription based. Verizon is also going to be providing some help to users who are suffering financially due to the outbreak by waiving late fees and any charges caused by overages. (Source: Engadget)

Why this is important for your business:

It's very important for your employees working from home that they have broadband. Think about: besides their normal personal usage, you're now asking to have conference calls, video chats and share files of all sizes. Consider reimbursing employees short term to up their broadband speeds and encourage them to take advantage of any offers provided by their internet service providers, like Verizon above.

5— Ecommerce ad spend has doubled from $4.8 million to $9.6 million.   

According to MediaRadar —between February 17th to March 9th —ecommerce ad spend doubled going from $4.8 million to $9.6 million. The jump occurred just as businesses remain closed due to the coronavirus and more companies are finding ways to work from home. Data shared by Coresight Research revealed that 47.2% of Americans who use the internet said —in February — they chose to stay away from malls and other shopping plazas. Similarly, approximately 75% of survey participants said that they would avoid malls and stores entirely if the pandemic were to worsen. (Source: A List Daily)

Why this is important for your business:

There will definitely a lot of lessons learned once the Coronavirus scare is over. One is that when people are forced to stay home they don't stop shopping. If your Main Street store is hurting, do you have a website to compensate? If not, now you've learned.

 

How Congress can flatten the curve for small business | TheHill - The Hill

Posted: 28 Mar 2020 12:00 PM PDT

We've all come to learn the imperative of "flattening the curve" in recent weeks — slowing the spread of the coronavirus to avoid overwhelming our healthcare system. While the concept derives from epidemiology, the present effort to rescue our nation's small businesses can benefit from its insight.

Every empty sidewalk makes clear that the coronavirus has foisted a massive spike of losses onto small firms nationwide. Congress has recognized the scale of the challenge, authorizing a new $367 billion small business loan program. Yet, as structured, the businesses that most need help may be least able to participate.

The recently passed stimulus offers a heavily discounted loan to nearly every small business in the country. But there's a catch: The business must first find a bank willing to lend it the money. For firms fortunate to remain steady through the crisis, this will be a welcome boost. For those businesses that have been forced to shutter, it's an awfully tough assignment.

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Flattening the curve would suggest we pursue an additional approach — providing rapid, intensive care to save companies on the precipice today, even as we extend broader stimulus to others. Of the nation's 6 million small businesses, a sector analysis indicates that slightly less than half will need to curtail much or all of their operations in a shutdown. These include firms in the most visibly affected industries such as restaurants, retailing, and tourism, as well as related fields such as distribution and manufacturing if production is impeded. The aggregate effect is enormous — in 2017, small businesses in these sectors employed 30 million people with a payroll exceeding $1.2 trillion.

But not all small businesses will close their doors, and not all are on the brink. Lawyers, accountants, and most other professional firms continue to operate, albeit remotely. Demand for veterinary clinics and auto repair shops endures. And, while it would be no one's wish, some firms focused on healthcare and basic goods may see growth. Firms like these comprise the other half of small businesses. They are no doubt pressured by this crisis, but they remain profitable and do not face the imminent peril of their peers.

Fortunately, there is a near-term, straightforward solution.

In addition to the stimulus bill, Congress should separately authorize a tax rebate for small businesses equal to the losses they incur this quarter, payable immediately and continuing in subsequent quarters as needed. For businesses that are closed and unable to generate revenues, this cash rebate will enable them to continue to pay their employees and expenses. For those businesses that have seen more modest impacts, the amount will be proportionately less. At the end of the year, if the business has returned to profitability, the government can recoup the difference.

To be effective, these payments must carry robust guardrails. The total rebate amount should be limited to the income taxes paid by a business (or for a passthrough or new entity, its owners) over a historical period, say 10 years. Those businesses that are structurally unprofitable or have avoided their prior tax obligations would need to find help elsewhere. Rebates covering the compensation of owners and other highly-paid employees should be capped at a reasonable amount, as should increases in a firm's overall cost structure. And, consistent with the current plan, companies should be required to maintain their payrolls throughout.

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Businesses that incur losses because they are shuttered generally need to replace those funds with equity, which a tax rebate provides. Based on industry-level data compiled by the Risk Management Association, companies in the most likely-affected sectors maintain profit margins averaging 8 percent of revenues. Put another way, a single month's expenses are roughly equivalent to a full year of earnings for these firms. The current stimulus includes partial loan forgiveness for two months of payroll. A tax rebate would be complementary — firms also have overhead and existing loans to pay, and many will take more time to recover. As well, because the rebate would apply only to losses, the two programs could work in tandem. By contrast, adding more debt that amounts to years worth of earnings creates an unsustainable burden.

Many small businesses struggled to obtain bank financing before the current crisis. Even fewer will qualify now that their condition is more tenuous. While the government has said it will guarantee these new loans, lenders know that such guarantees are contingent and the government may later refuse to pay in full (an event euphemistically called "repairing" the guarantee). In addition, because the proposed loan forgiveness is both partial and conditional, banks cannot calculate upfront how much debt the business will ultimately carry. With these uncertainties, lenders may well focus their efforts on the safest bets, rather than those firms most in need of assistance.

Moreover, the loan program's complex structure — with its mixture of guarantees, conditional forgiveness, and third-party origination — will take time to implement. The loan program's infrastructure rests on an existing Small Business Administration program, known as "7(a)", that is well-regarded, though operates at a fraction of the contemplated scale. In 2019, the 7(a) program processed an average of $2 billion in loans per month. Published 7(a) program data shows that 70 percent of banks in the country made no 7(a) loans at all last year; of the banks that did, half made less than five loans each. Most banks do not have systems in place to verify employer payrolls as the loan program requires, or to calculate loan forgiveness based on these amounts. Even with added capacity, borrowers with urgent cash needs may find themselves caught in lengthy queues — possibly for longer than they can afford to wait.

Flattening the curve isn't about curing the disease, it's about limiting the initial damage to improve overall survival. Government-backed loans are a critical component of a broader economic stimulus, and banks have an essential role to play. But loans, even if discounted, will not resuscitate many companies forced to close through no fault of their own. Offering small businesses direct relief through cash refunds provides them with what they need right now — a flattened financial curve that allows them to persevere today through to a brighter recovery tomorrow.

Jason Tepperman served as the Director of the U.S. Treasury's Small Business Lending Fund from 2010 to 2014. He currently is Managing Director of PLC Fund Advisors, LLC, a specialized small business lender. He holds an MBA with Distinction from Harvard Business School and a bachelors with honors in computer science and ethics, politics, & economics from Yale University.

What Small Businesses Need to Survive the Coronavirus Crisis - Harvard Business Review

Posted: 27 Mar 2020 11:01 AM PDT

Executive Summary

In the Coronavirus pandemic, franchising stands to lose 26,500 small businesses. The wrong legislation will raise the number of closures to 33,000. For small businesses outside of the franchising industry, this number could be even higher. Accessing capital and maximizing liquidity now are the most important things small businesses can do to survive; getting that message to legislators who hold the key to their economic future is how to do it.

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As local and state governments issue shelter-in-place orders, asking residents to remain home for all but essential errands, businesses — especially small local businesses — across the U.S. are facing difficult decisions. These institutions are crucial to our nation's economy, employing 58.9 million people in the United States, or about 47.5% of the total private sector workforce. Their GDP contribution measured $5.9 trillion in 2014, the most recent year for which small business GDP data is available.

My company, FASTSIGNS International, is included in these measures. We are a franchise brand with individual units owned and operated by local entrepreneurs. Businesses like ours support other businesses and organizations by providing signage and visual graphics for conferences, trade shows, events, point of purchase displays, and promotional advertisements. Suddenly — but understandably — demand for these services has dropped. Our business isn't alone. I am also the chair of the International Franchise Association, and in the past weeks I've watched the small businesses that make up the franchise industry struggle with dwindling sales due to this unforeseen economic crisis.

It's important that small businesses across America weather the pandemic. They — we— are vital to the nation's economy. But in such an incredible crisis, how? Here are three ways entrepreneurs can protect themselves.

1. Secure liquidity 

One of the key challenges for small businesses is access to cash. Running any business is a risky endeavor; however, small businesses are particularly vulnerable. According to the federal government's Small Business Administration, only about half of small businesses last longer than five years. Overhead costs like rent, payroll, and utilities leave very little liquid cash to owners, especially in the early years. Add to that the lack of revenue from slowing services and newly required benefits stemming from the pandemic, and our entrepreneurs will be devastated.

In order to combat this short-term challenge, small business owners should advocate for efforts to provide immediate liquidity and keep businesses solvent. Under one proposal, the "Small Business Workforce Stabilization Fund," the Treasury would forgive financial assistance provided to those small businesses which were solvent prior to the crisis, so long as the same number of employees are rehired within a 12-month period after the crisis. This program would provide immediate cash flow to the most vulnerable businesses, keep employees on payroll, and allow businesses to grow once customers return. The legislation would also increase the loan limit for SBA Express from $350,000 to $1 million. I believe proposals like this are critical tools to stabilize the market and provide relief for owners, workers, and their families.

2. Ensure access to capital

For franchise businesses, liquidity is just part of the equation. The cost of goods sold in the service industry is primarily wages paid to staff. Debt loads from Small Business Association loans are common for small businesses, and can create additional pressure on business owners. With demand down and paid leave provisions now a reality, layoffs are a real concern.

In order to help small businesses make payroll and cover expenses — including paid sick leave, paid FMLA, and loan repayment — a relief plan tailored to small businesses is in order. And in my view, the proposed $300 billion Restoring Economic Security, Confidence, and User Endurance (RESCUE) Businesses Act of 2020 would do just that. Under this proposal, the SBA would waive all fees for all 7(a) loans for one year for both lenders and borrowers and provide a 90 percent loan guarantee for all loans, no matter the size. The legislation would also increase the loan limit for SBA Express from $350,000 to $1 million and give local businesses the breathing room they need to remain in business and thus maintain staff in light of the health crisis.

3. Engage with policy-makers

Proposals in Washington calling for billions in aid to small business are enormous, and may feel out of reach as we work from our towns, miles away from our nation's capitol. But our voices are crucial in this moment of crisis, and we cannot leave big business to speak for us when it comes to emergency stimulus or any economic policy that impacts us.

This can be done individually and it can be done in partnership with other entrepreneurs; the mediums for engagement are endless. Social media, letters, email, phone calls are all effective ways to engage. The method is less important than the message, and the message is this: small businesses are the lifeblood of our communities and economy; we need relief in the midst of this crisis.

The small businesses within our communities provide jobs and economic growth to local economies. This is where most Americans are feeling the impact of the pandemic — our coffee shops, restaurants, gyms, and pet stores are all closed; our friends and family members are losing jobs.

It's time to take action. As the adage goes, an ounce of prevention is worth a pound of cure. In this pandemic environment, this wisdom is just as much for small business owners as it is for their patrons. Franchising stands to lose 26,500 small businesses due to COVID-19 alone and the wrong legislation will raise the number of closures to 33,000. For small businesses outside of the franchising industry, this number could be even higher. Accessing the capital you need and maximizing liquidity now are the most important things we can do to survive; getting that message to legislators who hold the key to our economic future is how we do it.

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