Rush to support small business a sign Ottawa finally sees scale of the problem - The Globe and Mail

Rush to support small business a sign Ottawa finally sees scale of the problem - The Globe and Mail


Rush to support small business a sign Ottawa finally sees scale of the problem - The Globe and Mail

Posted: 27 Mar 2020 05:19 PM PDT

There was a breathtaking rush here: The Prime Minister of Canada decided to send a major signal to small business that help was coming on Friday, because it could not wait till Monday.

The spiralling fears of Canada's small-business owners couldn't be left unaddressed any longer, so Justin Trudeau stepped out of Rideau Cottage armed with little more than a back-of-the-envelope policy decision to tell them help is on the way.

It is big. It can, potentially, keep many Canadians in jobs, and allow more of those small businesses to be ready to get back to normal business quickly.

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The plan is to pay 75 per cent of the wages of small businesses whose revenues have been hit by the coronavirus crisis – a substantial subsidy.

Details still to come on Monday. They will matter a lot. The subsidies will be available to "qualifying businesses," the PM said, without saying what that means. The Finance Department will hammer out the rules and get them down on paper over the weekend.

Just sending the signal that the subsidy is coming soon will prevent some layoffs, said Dan Kelly, the president of the Canadian Federation of Independent Business. "This will cool a lot of raw nerves right through the economy," he said.

Things have moved fast. In this case, the government was always behind. Only the previous week, on March 18, Finance Minister Bill Morneau unveiled an economic response plan that included wage subsidies of 10 per cent. That was in a bill the Liberals tabled Tuesday.

But on Friday, Mr. Trudeau had to acknowledge it wasn't enough. Not only that, he felt it was urgent to say so now – and that could not even wait till the details were ready on Monday.

This is the government of Canada catching up to the scale of the problem.

The first response was to put out a plan and wait to see if it needed adjustment. The government underestimated the scale of the problem. It was always growing, and the economic response didn't get ahead of the curve.

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It is admittedly a steep curve like none seen before, but the Canadian government's economic response has been slower than the early movers like Australia and smaller in scale than many – including our U.S. neighbours, now passing a US$2-trillion relief bill.

The 10-per-cent wage subsidy Ottawa initially planned was criticized as ineffective from the get-go. If you are going to do a wage subsidy in these times, it should be large enough to provide real incentive to keep people if payrolls. This one was a day late and 6½ dimes short.

So, Mr. Trudeau had to reassure small business owners – before another day passed – that the subsidy would be increased many times over, to 75 per cent.

There was no website with details, no backgrounder, no details.

The government released information on other newly announced measures, such as the deferral of GST and customs duties collection that finance officials have been working on for weeks. There was a $25-billion program to provide $40,000 loans to small business, $10,000 of which will actually be forgiven – in effect, a major small-business grant program that might be a lifeline for very small operations. For larger companies, there were measures to make credit available.

But there wasn't even basic info on the increased wage subsidy. Mr. Kelly's members were calling for details.

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Presumably, the government will cap the amount paid per employee. There will be criteria for the size of company that can apply. Mr. Morneau indicated the subsidy is for companies whose revenues have been hit by the coronavirus crisis – those that are battered but not broken – but there was no indication of the process or how bad the hit has to be. In New Zealand, for example, a company simply attests that its revenues have declined by 30 per cent.

Over the weekend, the Finance Department will rewrite the policy it wrote last week (March 18).

There are a lot of fast-moving implications of this crisis. The first priority was emergency aid to individuals, and the government revamped its plan dramatically in the week after its first proposal. Mr. Morneau signalled his next step is aid for airlines and the oil-and-gas sector.

In this kind of short, sharp shock to the economy, Mr. Trudeau's government is finding it can't measure the problem twice before setting the scale of its response. It has to get ahead of it.

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We Must Flatten The Curve For Small Businesses Too - Forbes

Posted: 27 Mar 2020 11:58 AM PDT

Alison Lingane is co-founder of Project Equity, a national leader in the movement to harness employee ownership to maintain thriving local business communities, retain selling owners' legacies, and address income and wealth inequality. We caught up with her today to get her take on the unprecedented effect the coronavirus pandemic is having on our economy and on our small businesses in particular. Unemployment claims jumped to 3.3 million over the last few days, nearly 5x the highest documented number on record in American history.

Alison, we're guessing you're not sleeping a lot this week — are we right?

Yes, I'm afraid so. Our small businesses, local businesses, are struggling to survive. Many suddenly have no money coming in at all. JP Morgan Chase did an important study in 2016 showing that small businesses (500 employees or fewer) have 27 days of cash buffer on average. Those with frontline workers tend to have much less – maybe two or two and a half weeks. So right now, in order to control the spread of the virus, we're putting businesses and our frontline workers in impossible situations. It's a new and uncharted kind of crisis. 

How do small businesses factor into the overall economic picture?

They contribute nearly half (44%) of the national GDP and employ 47% of the private sector workforce. The scale of the small business health and the impact that has on our economy, on real people's lives, matches the scale of the issue of public health, of protecting people from dying from the virus. We need to flatten the curve, so to speak, of the financial crisis for America's small businesses. (See graph below.)

Congress passed a $2 trillion stimulus today — what's your take?

I'm overall encouraged and it's important that it happened this week, right now, and that money gets to workers and businesses immediately. But let's look at this. In the $2 trillion package, there's about $350 billion to support small businesses to help them weather this crisis. On a very positive note, that includes funding for loans to small businesses that can be forgiven if they are used to retain and keep paying their workers. But do the math: $21.4 trillion was our 2019 GDP and small businesses contribute roughly 44% of that. So $350 billion in potentially forgivable loans equals roughly half a month of the revenue of small businesses as a whole. Now that's back of the envelope, not counting sick benefits and other things — all to say that the scale of the problem is vast. 

How is employee ownership a sturdier structure right now?

The DNA of businesses that are people first is just different, and yes, more resilient. Data from past recessions — including the great recession — show that employee-owned businesses outlast their competitors in business cycle downturns, and that they lay off fewer workers, and rehire them faster. In another part of the world, we see the example of Mondragon Corporation, a $13B cooperative business group in Spain's Basque region. In 2013, during the Great Recession, their largest manufacturing company went bankrupt. Their response? Repurpose 2,000 employee-owners across their business group of 80,000. Employee-owners came together to take small pay cuts across the board among other strategies to avoid having to lay off big swaths of their employee-owners. 

The other thing about employee-owned businesses is the personal safety net for employee-owners. We're all familiar with the study that shows that the average American doesn't have $400 for an emergency expense. Employee-owners have significantly higher assets—nearly twice as high on average as their peers in non-employee owned businesses based on a study by the National Center for Employee Ownership. We also see profit-sharing creating meaningful impacts for workers. As one example, at Niles Pie Company, a business that Project Equity helped to transition to employee ownership, profit-sharing was the equivalent of $4.50 per hour. It's game changing when you think about resiliency, when you think about a crisis, to actually have personal and family assets to fall back on.  

What can consumers do right now? 

Think about how you're spending your money and try to spend as much of it as you can with locally owned businesses. I have a friend who wants to make sure the produce market that's two blocks from her house doesn't go under and she's also concerned about going into the store. So she called them and they are totally open to having her text the order and they'll bring it out to her car. You can order takeout or delivery to support local restaurants, purchase gift cards from local stores or restaurants, order produce boxes from area farms or farm distribution networks, donate to a specific fund for supporting workers or local businesses. So, there's lots of ways and I just encourage people to just stop and think: how do I make sure what money I spend goes to locally owned businesses? This is always important and absolutely critical now.

What looks different after the pandemic?

We're at a juncture. It's about us as a society making a choice about how are going to rebuild — and I'm choosing that word "rebuild" because I do think that's what it will be. How do we avoid  further wealth concentration that makes us less stable for the next crisis — be it a pandemic or something else we can't see coming. 

At Project Equity, we're working with our partners to support employee ownership transitions, including providing capital to do so. That's a strong path to economic resiliency — not to mention equity — and it absolutely must be in our playbook as a country if we want to come out of this stronger than before. 

Small Businesses Could Vanish During Coronavirus Pandemic - TheStreet

Posted: 26 Mar 2020 12:18 PM PDT

As states take stronger, broader measures to contain the coronavirus, economists warn that time is running out to save America's small business community.

Because of COVID-19, Ottawa jewelry maker among the small businesses whose revenues have dried up - Ottawa Citizen

Posted: 28 Mar 2020 07:58 AM PDT

Article content

Ottawa jewelry maker Alyssa Spaxman kids that she's doing a lot of deep breathing these days.

After all, she needs a means of calming herself, given COVID-19 and the massive hit her business, Strut Jewelry, has taken.

"Carrying the anxiety and fear of losing my income, along with concerns for the health of my friends, family and myself … has been completely draining," Spaxman says.

The financial impact of the pandemic has been "immeasurable," says Spaxman, who launched her business in 2009 and has two part-time employees working with her in her studio.

She finds herself in a plight common to many small businesses and product makers who have wares to sell but practically no way now to sell them.

The income streams that Spaxman built up over the years "have all toppled in one week," she says.

"Events are cancelled, stores that carry my work are all closed. I am down to a trickle of online sales," says Spaxman.

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