There is no historical parallel for the economic collapse the coronavirus is inflicting on economies around the globe. In just 3 weeks, 16 million Americans have joined the rolls of the unemployed, representing more than half the jobs created after the 2008 Great Recession.
The impact of the outbreak on small businesses is particularly acute. Ninety-six percent of US small businesses report being impacted by the outbreak already with only 13% confident about their contingency plans to maintain their business. Workers in the retail, hospitality, gig economies, and restaurant industries are particularly hard hit. The National Restaurant Association expects total restaurant industry losses to exceed $225 billion and almost 60% of the jobs lost so far are those of restaurant workers.
Small businesses are reeling, and their owners are wondering whether there will be anything to return to once the crisis subsides.
According to research by the JP Morgan Chase Institute, the median small business holds only enough cash reserves to survive 27 days. The title of that 2016 report, “Cash is King”, is an observation that may as well be the title of the federal government’s relief plan for small business owners and their employees. Through the CARES Act, the Small Business Administration (SBA) was given approval to infuse $349 billion into small businesses in the form of low-interest loans with the explicit goal of helping them maintain their payrolls. Congress is exploring allocating an additional $250B to SBA in the next relief package. Most of the loans can be forgiven (essentially converted to grants) if spent on payroll costs (i.e. covering the first eight weeks of payroll costs, utilities, mortgage interest, and rent). You can view a comparison of SBA loan programs here.
While cities cannot provide the magnitude of financial relief to small businesses that the US Treasury can, mayors and city councilors are nonetheless taking swift and strategic actions to improve the survival odds for local businesses. Here are some emerging municipal practices to keep small businesses operating:
1. Halting or deferring financial burdens placed on small businesses
For businesses with little to no revenue, the prospect of paying utilities, taxes, or licensing fees poses a significant threat to their ability to remain open and pay their workers. Most cities have direct authority – either through executive order or legislative motion – to approve such actions, and many already have.
- On March 13th, City of Seattle, WA’s Office of Finance and Administrative Services deferred business and occupation tax filing and payment
- On March 17th, the City of New Orleans, LA announced it was waiving fines, fees, interest and penalties on sales tax payments due to the city for 60 days.
- Cities around the country, including New Orleans, St. Louis, and Phoenix, have ordered utility companies to keep businesses’ lights on and water running while the public health crisis persists.
2. Creating a local relief fund with a blend of financing options
Local governments are taking different approaches to providing direct financial relief for small businesses. Some are in a “wait and see” mode while they determine the level of need after federal funds are disbursed. Some are taking immediate action and creating funds through a combination of city resources, philanthropic dollars, or by redeploying state Community Development Block Grant (CDBG) funds to small businesses. In talking with cities who have created a fund, most are opting for a blend of zero- or low-interest loans and grants.
- On April 2nd, Jersey City, NJ announced it would redirect CDBG funds to match grants awarded to small businesses and nonprofits by the state economic development agency, up to $10,000 per business.
- On March 17th, in partnership with the Philadelphia Industrial Development Corporation and the Department of Commerce, the City of Philadelphia, PA announced a $10 million COVID-19 Small Business Relief Fund to provide grants and zero-interest loans to impacted businesses. In its first week, the program received over 1,300 applications with 80% of the applications coming from small businesses of no more than 5 employees. Businesses can apply for multiple relief programs through a single application.
- On April 2nd, City of San Francisco, CA announced a $9 million zero-interest loan fund and added $1 million to the city’s existing Resiliency Fund, launched on March 11th.
3. Providing enhanced support to businesses applying for SBA loans
The volume of small businesses who need help applying for federal relief exceeds the capacity of most cities’ existing business supports. To supplement their efforts, cities are redeploying staff to provide technical assistance to business owners as they apply for SBA loans, making special efforts to reach out to minority-owned businesses that might face structural barriers in completing applications. This is particularly true for business owners whose first language is not English or who lack consistent access to the internet or social media.
- The City of Chattanooga, TN is hosting webinars specifically for minority-owned businesses in partnership with city councilmembers and working with local non-profits to offer similar services for Spanish-speaking business owners. It is also sharing information over the radio.
- The City of Vallejo, CA transitioned its economic development from project management to advocating for small businesses and providing critical information and resources.
4. Evaluating the impact on small businesses through surveys
“What is the risk of your going out of business?” “What areas of your business are you most concerned about?” “How many employees do you estimate you will have to lay off?” Many cities are asking these questions in digital surveys available on their websites and by distributing them to business support organizations who engage in direct outreach. While the data will likely be imperfect, it can inform future budgets and the city’s approach to state and federal advocacy.
- Multiple cities, from Providence, RI to Eugene, OR have shared online surveys measuring the impact of COVID-19 on small businesses. Find a few samples below:
5. Creating a central, online repository for resources and information
Cities are creating simple, user-friendly websites that act as a one-stop shop for resources, tools, and information for small businesses. The best sites are updated daily with relevant news from City Hall and state and federal agencies, as well as with step-by-step guidance on how restaurants can transition from meal service to delivery, how to apply for SBA loans, and how to contact local SBA-approved lenders or other local business support organizations.
- The City of Birmgingham, AL created the website, BHAMSTRONG, to share information and resources with small businesses and to measure interest in creating a meal preparation network for restaurant owners.
- The City of Oakland, CA created a web portal for business owners to identify the local, state, and federal resources available to them.
- The City of Boston, MA’s resource page for small businesses includes a guidebook for how to transition from brick-and-mortar businesses to takeout and delivery.
NLC will continue working with cities to support you through this crisis and the ensuing recovery. We will continue to share emerging practices, support peer learning, and advocate for the needs of cities, towns, and villages. Please visit our COVID-19 Local Action tracker to share what your city is doing and get ideas from other cities around the nation.
About the Author: Phil Berkaw is a program manager on NLC’s Innovation Ecosystems team.