Small Businesses Brace for Prolonged Crisis, Short on Cash and Customers - The Wall Street Journal

Small Businesses Brace for Prolonged Crisis, Short on Cash and Customers - The Wall Street Journal


Small Businesses Brace for Prolonged Crisis, Short on Cash and Customers - The Wall Street Journal

Posted: 22 Jul 2020 08:52 AM PDT

Chris Mittelstaedt successfully navigated his San Francisco Bay Area fruit and snack delivery business through the dot-com bust, the 2008 financial crisis and the first few months of the economic ravages of the coronavirus pandemic.

But, along with many of America's small-business owners, his hopes for a quick economic recovery have been dashed. Surging Covid-19 cases in many parts of the country and fears of additional outbreaks are forcing him to face a longer-term financial crisis. This month, Mr. Mittelstaedt laid off...

Forthcoming small business grant program - Thegardenisland.com

Posted: 23 Jul 2020 03:05 AM PDT

LIHU'E — The county has allocated $5 million in grants for small businesses that will be distributed by local credit unions next month.

The Small Business Boost Program will offer up to $7,500 per grant to businesses, which will not have to be paid back, said Office of Economic Development Director Nalani Brun. The program should begin in early August.

The $5 million comes from the county's $28 million in Coronavirus Aid, Relief and Economic Security (CARES) Act funds sub awarded by the state. It is the largest single line-item pulled from these funds.

Credit unions will evaluate applications and distribute the funds on a first-come, first-served basis. The county is following similar models used in O'ahu and Maui.

The $5 million will service about 600 businesses, and credit unions will take small cuts between 2.5% to 5%.

The county has partnered with Kaua'i Government Employees' Federal Credit Union, Gather Federal Credit Union, Kaua'i Teachers Federal Credit Union and Hawai'i USA Federal Credit Union.

There are approximately 1,700 registered businesses on Kaua'i.

The county originally hoped to launch the project in July, but is still working on contracts.

Participants will not be able to use this grant for duplicate funds. So if a business received Paycheck Protection Program funds, this grant will not be able to be used for the same line items.

"Eligibility will be to preserve small, local established businesses that have a reasonable chance of continuing with this financial help," Brun said.

Brun said more information, including documents and eligibility requirements, will be posted prior to the application launch via kauaiforward.com, advertising on social media and business associations.

"We will make sure everybody knows what's happening," she said.

•••

Sabrina Bodon, public safety and government reporter, can be reached at 245-0441 or sbodon@thegardenisland.com.

Small-business loans saved as many as 3.2 million US jobs - Crain's Detroit Business

Posted: 22 Jul 2020 06:02 PM PDT

Hundreds of billions of dollars in government loans to small businesses helped save between 1.4 million and 3.2 million jobs during the coronavirus pandemic, according to a new study by Massachusetts Institute of Technology and Federal Reserve researchers.

The Paycheck Protection Program, a centerpiece of the Trump administration's economic response to the pandemic, boosted employment by 2 percent to 4.5 percent, economists including MIT's David Autor wrote in the study posted Wednesday. The preliminary study was based on data from payroll processor Automatic Data Processing Inc. through the first week of June and doesn't analyze PPP data directly.

The research suggests that providing money directly to companies helped curb job losses during the pandemic, though employment remains about 15 million below pre-coronavirus levels. The stimulus program, which has distributed more than $500 billion in loans to small businesses, was set to expire at the end of June before Congress extended it through the beginning of August. Loans, distributed via the Small Business Administration, will be forgiven if companies maintain jobs or rehire laid-off workers and if most of the money goes to payroll.

But the program has been controversial and hasn't worked for everyone. Some companies had trouble applying while others decided not to because they don't expect to be able to rehire workers. The Trump administration has also faced criticism for giving loans to businesses that haven't been hit as hard by the pandemic along with larger, publicly-traded firms.

According to the MIT report, the program "was certainly not perfectly targeted" in reaching companies most in need, but a "substantial" number of companies that were struggling did receive funds.

TCF Bank pledges $1 billion in loans to small businesses owned by women and minorities - FOX 2 Detroit

Posted: 23 Jul 2020 06:33 AM PDT

The TCF Bank is pledging to make a $1 billion loan commitment to minority and women-owned small businesses, as part of the company's original promise to do more to uplift citizens of color in the city.

The massive infusion of money is will be offered as small business loans of up to $1 million to each company. The money will be offered across regions where the bank, which completed a merger with Chemical Bank in 2019 to be the state's largest bank, is located. In addition to Detroit, that includes Minneapolis/St. Paul, Chicago, Cleveland, and Grand Rapids. 

"While small businesses drive the economy and are the backbone of our neighborhoods, minority-owned and women-owned small businesses have historically had a more difficult time obtaining loans than their white and male counterparts. We recognize the crucial need for change, and as a bank committed to strengthening individuals, businesses, and communities, we are inspired to help these business owners create wealth and pursue their dreams," said TCF Executive Chairman Gary Torgow.

Residents might recall a promise that Detroit's nine biggest companies made weeks ago in the wake of large protests against police brutality and institutional racism. CEOs from car companies, health care systems, land developers, and banks all verbalized their commitment to root out systemic racism and invest money to reduce those disparities.

Thursday's announcement form Torgow is the first tangible promise that Detroit Mayor Mike Duggan has secured from the businesses that made an appearance on June 3.

RELATED: CEOs from Detroit's biggest companies take joint stand against racism

Additionally, TCF Bank will also start a $10 million grant program to help low-to-moderate-income home buyers. The Heart and Home program will offer grants up to $3,000 to help cover closing costs for people making up to 80% of the area median income. The bank wants to fund 750 grants by the end of 2020.

"When people own their homes, it builds the neighborhood, provides stabilization and strengthens the community. We recognize that access to funds for a down payment is the single largest hurdle to home ownership, and our hope is this grant will provide a pathway to home ownership for more people," said CEO Craig Dahl.

The business loans will still be subject to the same requirements that any business loan must meet. However, loans aren't restricted to brick-and-mortar businesses and will also be available to those that operate online or elsewhere. 

It's not clear how the $1 billion will be divided up among the cities where TCF is based. The executive chairman cited the placement of the bank's new headquarters in Detroit as a driving reason it serviced more than half of its Payment Personal Protection loans in Michigan.

Torgow said the systems for applying for a loan will be available soon.

How small businesses have dealt with the crisis - The Economist

Posted: 23 Jul 2020 08:55 AM PDT

Editor's note: Some of our covid-19 coverage is free for readers of The Economist Today, our daily newsletter. For more stories and our pandemic tracker, see our hub

AS A SPECIAL-OPERATIONS pilot in the American air force, Joe Shamess was used to handling some tricky situations. But the sudden arrival of the coronavirus pandemic this year meant he faced an unexpected challenge. Together with another pilot, Brian Steorts, Mr Shamess had founded Flags of Valor, a company that focused on employing veterans to make products such as flags and gifts for employee-recognition programmes. When the pandemic hit, the company quickly lost two-thirds of its revenue.

Smaller companies like Flags of Valor have been the most vulnerable to the pandemic and its economic turbulence. Most have little in the way of financial reserves and sell a limited range of products. Tom Sullivan, vice-president of small-business policy at the US Chamber of Commerce, points to data showing that 20% of small businesses (those with fewer than 500 employees) in America have closed since the virus hit. Things are worse for black-owned businesses, which often find it more difficult to get bank loans; 40% of such firms have shut.

Government support for American small businesses has been in the form of loans under the Paycheck Protection Programme (PPP). Mr Sullivan says 72% of small firms have received a PPP loan. But, Mr Shamess reports, "even though we were one of the very first applicants, we did not receive funds in the first round." He feels his bank failed to give the application the attention it deserved.

With the help of a different bank, the company managed to get funds in the second round of PPP loans. But it still took almost a month from the initial application to receipt of the money. Mr Shamess says that the scale of the programme was so great and the time needed to distribute it was so short that it was rather like trying to build a parachute while falling to the ground.

The management therefore had to act without waiting for the feds. The work week went from 40 hours to 20. Some of the firm's 24 workers were furloughed. The main problem was not manufacturing; the factory was big enough to keep staff socially distanced. It was distribution. Mr Shamess had to close the showroom; trade shows, which brought in a lot of business, were cancelled.

So the firm had to innovate. The showroom is now closed for good and most business is online; one of the firm's biggest sellers is a newly launched crafts kit for kids, to keep little ones occupied during the long break from school. All of the craftsmen are now back working full time. Still, Mr Shamess says that "we are a different company from four months ago."

Another firm that has had to transform itself during the pandemic is VetCor, which also happens to employ military veterans but operates in the service sector. Its main business was the restoration of buildings damaged by floods and damp, a common risk in Florida, where it is based. The pandemic forced the company to close one of its offices, lay off some of its 31 workers and apply for a PPP loan (which it received). But Paul Huszar, a former army lieutenant-colonel who runs VetCor, realised the crisis created a business opportunity.

Part of the firm's work involved dealing with the mould spores associated with damp conditions. The same processes could be used to disinfect buildings to eliminate the coronavirus; the company already had the right chemicals, air scrubbers and personal-protection equipment. This has proved a popular service with restaurants in the area.

VetCor also operates a franchising business, but four conferences where it was due to recruit franchisees were cancelled. So it signed up for a virtual career conference aimed at veterans from Annapolis and West Point (America's naval and military academies, respectively). Mr Huszar expects several franchisees to sign up as a result.

This flexibility reflects some of the rules Mr Huszar developed when serving in Iraq: don't be wedded to the plan and recognise when conditions change. And that is one of the advantages of running a small company; it is easier to change direction quickly than at a big firm.

The 20% pandemic closure rate among small businesses in America, bad though it is, could be read as showing that most soldier on. A survey from the National Federation of Independent Business shows that optimism among small firms rose for the second consecutive month in June. This month's spike in infections might temper it again. But then small-business managers like Messrs Shamess and Huszar will once again adapt. They have the skills to do so.

Editor's note: Some of our covid-19 coverage is free for readers of The Economist Today, our daily newsletter. For more stories and our pandemic tracker, see our hub

This article appeared in the Business section of the print edition under the headline "Pandemic veterans"

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