PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

SMALL BUSINESS INSIDER: Re-Opening the Economy, PPP Politics and Update, COVID-19 Tips and More

By at 18 April, 2020, 10:26 am

Small Business Insider: Business Intelligence, Policy Update and News

By Karen Kerrigan-

The PPP money has run out and “economic injury disaster loan” (EIDL) funds are nowhere to be found. The EIDL program quickly ran out of funds due to massive demand, and very few people have heard anything following the submission of their applications. We are hearing reports of $1,000 here and there that has been received by small businesses – the amounts are far, far less than originally advertised in the CARES Act (as we reported in the previous Small Business Insider). Many PPP applications are now stuck in the pipeline, as funds have run dry.

Latest PPP Data

Here’s the latest data/report from the Small Business Administration (SBA) on the status of PPP loans. The data – reported as of April 16, Noon ET – shows that 1,661,367 loans were made with $342,277,999,103 net dollars in loans approved. Lender count is 4,975.

In a statement released today (April 17), Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza said:

“Nearly 20% of the amount approved was processed by lenders with less than $1 billion in assets, and approximately 60% of the loans were approved by banks with $10 billion of assets or less. No lender accounted for more than 5% of the total dollar amount of the program.

 “The vast majority of these loans – 74% of them – were for under $150,000, demonstrating the accessibility of this program to even the smallest of small businesses.

“The PPP provided funds to a wide variety of industries in all sectors of the economy, including construction, manufacturing, food and hospitality services, health care, agriculture, and retail, among many others.  This demonstrates the broad diversity of PPP and its support for American workers across the board.” 

Action by Congress: As you know by now, Congress did not act to replenish PPP funds this week. Democrats want more funding for hospitals and other programs, along with stronger language and action to ensure a portion of PPP loans go to underserved small businesses.

In a media release on April 16, I implored Congress to act and pointed out the areas where PPP changes are needed to ensure the program works more effectively for the largest number of small businesses. Again, and as I have noted in my conversations with the media and legislative staff alike, some of these shortfalls and restrictions were unforeseen given the timing of the CARES Act’s drafting. Some of the rules were unexpected, as they were not part of the legislative text.

None-the-less, as I expressed in my media statement:

“We support amending the rules on PPP loans to provide small businesses more flexibility, within reason, in selecting their 8-week window for loan forgiveness, extending the June 30th end date for the window, and relaxing the restrictions – again within reason – that have been placed on non-payroll forgivable expenses. Some of this, we believe, can be done through regulatory changes. The June 30th deadline for the program appears to be a provision Congress must address. That being the case, Congress can quickly act now to re-fuel the PPP program and then quickly come back to addressing these needed changes. Ideally, this would happen together. Again, Congress must act now.”

SBE Council joined more than 200 trade association and business organizations in signing a letter to congressional leadership urging increased funding for the PPP program. As noted in the letter:

“The economic damage caused by stay home orders is immense and growing. The federal response needs to grow with it.”  

Tune in to our latest Growth Without Barriers podcast here, where I discuss the need for Congress to quickly refuel the PPP program, the latest guidance, “re-opening the economy,” EIDL, and more.

More Guidance this Past Week: The U.S. Treasury and SBA issued supplemental guidance on several issues, including clarification for the self-employed regarding the calculation of net income, and payroll for Paycheck Protection Program (PPP) loans, and related guidance on forgivable expenses. Access the guidance here. On April 13, PPP guidance from the U.S. Treasury was released that clarifies issues for lenders and borrowers. Access the guidance here.

The Need for Flexibility: When the PPP program first launched, we talked about the need for speed. Now, we are also talking about the need for flexibility. On CNBC this week, I discussed the need for flexibility in the rules to accommodate economic realities on the ground and the longer than anticipated stay-at-home/shut-down orders that will stretch the harsh economic effects of COVID-19 well beyond summer.

Read the full CNBC article about why flexibility is needed. You can watch the segment here.

As covered in the piece:

Karen Kerrigan, CEO of the Small Business & Entrepreneurship Council, an industry group, agreed that regulation around PPP loans should be amended. 

Appearing Wednesday on “Power Lunch,” Kerrigan argued the economic outlook in the country has gotten significantly worse than when the legislation was passed in late March. She said believed in Rosen’s strategy for using the loans.

“There does need to be more flexibility in the rules,” she said. 

Fintech Lenders Approved: Late in the day on April 10, U.S. Treasury approved the participation of leading fintech companies as non-bank lenders for PPP loans. SBE Council had called for fintech’s participation from the very launch of the PPP program, which unfortunately has run out of money. Hopefully they will be given an opportunity to add their value to the PPP, which also includes reaching many, many different small businesses that lack access and leverage with traditional lenders. (See my April 10 Fox Business opinion piece: “Coronavirus Crisis – Use Fintech’s Innovation, Speed to Help Small Business Survive.”)

Guidelines for Opening Up America: President Trump released federal guidelines on April 16, which is timely given that states are determining and executing plans and collaborating regionally with neighboring states. The states have the ultimate authority on this matter, and SBE Council members and partner organizations are busy at work, providing guidance and information to Governors, as well as state and local officials.  Small business America needs to be at the table and providing their input and solutions, and we are so pleased that many SBE Council members and network partners are engaged in this “re-opening” effort at the state and local level. (Read the latest Littler update on stay-at-home orders by state and their duration.)

As noted above, Governors have started forming blocks and acting on their own to re-boot the economy, and local business organizations are pushing for a green light in terms of dates for lifting restrictions to salvage and provide some hope for business entities that remain intact. Entrepreneurs and business leaders fully understand this may have to happen in stages, and are confident their hygienic practices and smart changes they’ve made to business operations and engagement with customers will prevent and mitigate infection or re-infection.

No one expects that the U.S. economy will return to “business as usual” in the short-run. It is great to see political leaders across the nation include the small business community in their strategy sessions and planning to help execute a phased, safe and common-sense strategy to re-openings.

Read how Governor Gregg Abbot is re-opening the Lone Star State in this Texas Tribune article: “Gov. Greg Abbott on Friday announced initial steps to reopen the Texas economy during the coronavirus pandemic, including those that in the next week will loosen surgery restrictions at medical facilities, allow all retail stores to provide product pickups and reopen state parks.”  The re-opening will occur in stages.

Upcoming Re-Opening Webinar

Please SAVE THE DATE: April 23, 11:00 a.m. -12:00 Noon ET for our upcoming Webinar:

SafeSmart, Restart Plan for Opening Main Street

Preparing Small Businesses for Customers and Commerce as States Lift COVID-19 Restrictions

An invitation will be forthcoming in the very near future.

As we allude to in our Business Intelligence section below, SBE Council is also working on reforms and initiatives that look to incentivize and deploy private capital in this critical effort to save local businesses. Government has its limits in terms of resources, and we know untold amounts of private capital is sitting idle. We want to tap that creatively, responsibly and quickly!  Much more on this to come.

Stay positive, hopeful and resilient.

Karen

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

 

Survive and Thrive Summit: April 23 – 4 p.m.-10 p.m. ET

Hosted by Entrepreneur and Author, Ramon Ray, the Survive and Thrive Summit 2020 brings together leading brands, experts and entrepreneurs to acknowledge the challenges we face so we can pull together to push forward and thrive.

SBE Council president & CEO Karen Kerrigan will also join the lineup of speakers for this important event. Her focus will be on government initiatives, what’s happening on loan programs and related policies to help small businesses, as well as new initiatives SBE Council is working on to bring capital and support to America’s entrepreneurs.

Register here.

 

Business Intelligence, Tips and Resources for Small Businesses

Insight and Inspiration from E2 Entrepreneurial Ecosystems

SBE Council enjoys reading E2 Entrepreneurial Ecosystems’ weekly newsletter, and our president & CEO Karen Kerrigan was moved to share the introduction of their enews this week, which provides important insight:

Over the past month our conversations surrounding the pandemic and entrepreneurs have led us to believe there are some common threads to those businesses that will survive and thrive beyond this pandemic:

● They were some of the quickest to recognize the potential impact and begin strategizing adaptations.

● They are flexible, forward-looking, and see opportunity in challenges.

● They are focused on the well-being of their employees and partners.

● They see value in collaborating on solutions and supporting competitors even in a time of need.

In short, the “sur-thrivers” are the folks who are rooted in the community, are working toward the good of the whole, and will take away lessons for what can be done better in the future. Once we move into pandemic and recession recovery, growing community-centered entrepreneurial ecosystems will be more important than ever.

Check out E2 Entrepreneurial Ecosystems here.

 

COVID-19 Survival Strategies Featuring Advice from SBE Council Members

Three Tricks to Keep Kids from Interrupting While You Work from Home, Ann Dolin, President and Founder, Educational Connections Tutoring

Ann Dolin’s business model shifted very rapidly once DC-area schools were shuttered. But she continues to provide practical advice and instruction to students and parents alike. She’s pivoted her one-on-one tutoring and test prep business “a full 180 to online tutoring.” Ann feels newly invigorated about the opportunity for her business, its 200 tutor-employees and the market she serves. As Ann noted in a conversation with SBE Council president & CEO Karen Kerrigan recently, revenues have plunged 30% during this crisis and she quickly moved to repackage the company’s offerings to serve kids and parents nationwide. That means the business has moved from a regional market to a national one.

Ann said:

“At first, all I could think about was how bad things were and how to get that darned PPP paperwork done, but now I’m optimistic and excited.”

Ann’s determination, resiliency and innovative spirit is emblematic of so many SBE Council members.  Read her latest tips for working efficiently at home with the kids in this SBE Council Small Business Strategies special “Three Tricks to Keep Kids from Interrupting While You Work at Home.”

 

Crowdfunding Innovation in Response to the Coronavirus Capital Crunch

It was during the financial crisis and Great Recession that SBE Council and members Sherwood Neiss and Jason Best (co-founders of Crowdfunding Capital Advisors) led the effort to make regulated crowdfunding legal. As many of our members know, SBE Council is now working on common-sense changes and reforms that will leverage the early successes of regulated crowdfunding.

SBE Council Member Youngro Lee, co-founder and CEO of Nextseed (who also chairs the Association of Online Investment Platforms),  cares deeply about helping local businesses with their funding needs, and a new product is directed towards helping small businesses with their capital needs during COVID-19 and its aftermath.

The NextSeed Community Bridge Note (CBN) will leverage Regulation Crowdfunding rules to provide small businesses with an alternative and efficient way to raise flexible, lower cost, lower fee financing.

The details of the program can be reviewed here.

Nextseed redesigned their application to streamline the process, with a renewed focus on helping businesses move quickly through the review and diligence process to launch a campaign in as little as 2-4 weeks.

Here are some of the CBN program highlights:

● Working capital for established businesses

● No payments due until Jan 31, 2021

● Maturity of 48 months

● Revenue sharing note designed to give flexibility to businesses

● $10,000 minimum raise (maximum based on projected working capital needs and debt service coverage ratio)

As is always the case during challenging and transformative period such as the one we are experiencing, entrepreneurs are stepping up with solutions to provide solutions in the marketplace.

Policy and Advocacy: SBE Council continues to work on policy reforms and legislative changes that are needed – and would be especially useful now for small businesses – that would leverage regulated crowdfunding’s value and technology to drive more private capital into the hands of small businesses and startups. Government money and COVID-19 related loan programs are limited and are not reaching many local businesses that need these resources the most.

The early principle and rationale for advancing regulated crowdfunding from the very beginning (the JOBS Act passed in April 2012) still stands today: To democratize access to capital for small businesses and startups in every corner of America.

 

This Rockville Brewery’s Alcohol Delivery Platform Launched as Soon as Restaurants Shut Down – It’s Now in 21 States, Washington Business Journals.

Bierma was launched in 45 minutes.

“Maryland Gov. Larry Hogan’s decision last month to close dining rooms across the state sent scores of restaurant, bar and brewery owners scrambling to adjust to a new way of doing business.

But one brewery was ahead of the curve. Within an hour of Hogan’s announcement March 16, Montgomery County’s True Respite Brewing Co. rolled out Biermi, a new craft beverage delivery platform that has buoyed sales for breweries, wineries, distilleries and other small producers in Maryland, Virginia and 19 more states in recent weeks.

‘In that vacuum of information, people were like, oh my God, what’s going to happen, how do we manage, what does the future look like and what does this mean for me?’ Brendan O’Leary, a co-founder of the Rockville brewery, said. ‘We launched Biermi 45 minutes later.’”

 

How Urban Places Can Adapt After Coronavirus, CNU Public Square

This article covers new and emerging market demands – and therefore opportunities for entrepreneurs – in the current and post COVID-19 economy.

“We may candidly acknowledge the risk that some households could indeed choose to flee the biggest cities and population centers in the pursuit of fresh air and wider open spaces. However, let’s not allow this scenario to cast a pall on our cities and urban places. Rather, I recommend that we identify ways that we can provide better urban places to meet the wants, needs, and lifestyle preferences of a rapidly changing demographic. The following ideas are intended to keep the discussion and dialogue moving in the right direction, positively and proactively.”

 

IRS Extends Opportunity Zone Tax Incentive Deadlines, Manatt.

“On Friday, April 10, the IRS released Notice 2020-23 (the Extension Notice), which extended certain deadlines for federal tax-related obligations that fall on and between April 1 and July 14 of this year. Among the deadlines extended is the 180-day period for a taxpayer with eligible capital gains to invest some or all of those gains in a qualified opportunity fund (QOF) in order to be able to elect benefits under the opportunity zone (OZ) tax incentive. The OZ incentive, enacted in late 2017, generally permits any person that would otherwise be required to report capital gains (individuals, corporations, REITs, trusts, tax-exempt entities, partnerships, etc.) to invest those gains in QOFs within a 180-day period and make an election on their tax return in order to defer the payment of tax on those capital gains (to the extent invested in a QOF) until as late as the end of 2026. Additional benefits are also available pursuant to the OZ incentive, including potential partial forgiveness of the tax on the original capital gain and exclusion of future capital gains, provided certain requirements are satisfied.”

 

Economic Update: The Latest Data, Analysis and Commentary

Coronavirus is Crushing the Housing Market, and Therefore, Small Businesses: SBE Council chief economist Ray Keating reviews the latest data on housing starts, and makes clear that residential housing construction is all about small business.

The Fed’s Grim Beige Book Story and What’s Lies Ahead for the Economy: Keating looks at the latest grim assessment of the economy courtesy of the Federal Reserve’s Beige Book, and then reflects upon key questions regarding what lies ahead for the economy. That is, how long will this shutdown last? And what about the subsequent recovery?

The Hard-Hit Restaurant Industry: In a blog post, Keating focuses on restaurant businesses, and the considerable challenges and losses being experienced during this coronavirus pandemic. It’s clear by the data provided that this industry is overwhelmingly about small business, and links to some handy advice for restaurant owners and managers to help during this crisis.

Record Declines in March Economy: Keating notes that the declines in retail sales and industrial production (including manufacturing) for March were in record territory. In fact, Keating points out that the drop-offs in industrial and manufacturing production hadn’t been seen since the immediate aftermath of World War II.

Reminder During The COVID-19 Crisis: The Oil and Natural Gas Industry is Dominated by Small Businesses: Keating brings up a key point during this economic downturn regarding the energy industry, that is, how many firms will survive? Keating makes clear that this is a small business issue because, as he shows, all energy sectors are overwhelmingly populated by small firms.

 

PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

 

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