Government Must Do More To Ensure Small Business Access to Capital During Crisis

These are unprecedented times. As quarantines, closures, and general shutdowns grip more and more of our nation; small businesses are faced with devastating economic circumstances. Restaurants and bars are either closed or operating with far fewer patrons. Without sporting events, Broadway shows, concerts, museums, and the countless other activities that have been canceled or postponed, Main Street small businesses are facing a sudden and precipitous drop in revenue. Some data sources are previewing that small businesses could run out of operating cash in a week or two as shutdowns continue and expand. Our nation is facing potentially catastrophic job losses.

This is not the headline-grabbing news of stock market plunges, but the trends our members are seeing in their small business customers’ revenues is an immediate crisis waiting to happen. What’s most concerning is that federal and state programs aimed at providing emergency funding through various state agencies and the U.S. Small Business Administration (SBA) are ill-equipped to provide the financing that small businesses need in the timeline the current crisis demands. However, there are steps government partners can take to advance unprecedented emergency actions to support small businesses.  Local, state and federal governments should act immediately to stop America’s small businesses from closing and or laying off potentially millions of workers.

First, governors and local government executives must call on Congress, SBA, and the White House to suspend the requirement for governors to file county-by-county disaster declarations with SBA before federal disaster loans can be made. The President has the authority to override this requirement under the Stafford Act. This will free up states to act quickly to provide small businesses with some relief and not wait until every county in a state has declared a separate emergency. We all can agree that a state of emergency exists everywhere.

Second, governors and city executives should ask Congress and the White House to suspend the “credit elsewhere” provision that precludes states from offering economic assistance to small businesses in partnership with the federal government. Helping small businesses get through this financial crisis is going to require close coordination between state, local, and federal agencies.

Third, there needs to be some temporary relief for small businesses that fall behind on their bills and payments because they’re being crushed by the current situation. This includes requesting legislation or executive orders temporarily preventing commercial evictions until business returns to normal, as well as legislation avoiding the suspension of utilities for hard-hit businesses.

Lastly, governors and local government executives can work to create and manage emergency grant and disaster loan programs using state funds, state investment banks, and excise-tax revenues. Most importantly, SBA and state and local agencies must be authorized to seek help from the private sector to underwrite, evaluate, and administer these loans and funding options. These government agencies are ill-equipped to handle the volume of small businesses that are going to need emergency financing and, even in the best of times, could not supply businesses with the funding they will need quickly enough.

To this end, government agencies must be allowed to partner with innovative financial technology companies that can handle that amount of data and underwriting quickly. These can be both service providers that work on behalf of banks that already partner with SBA as well as non-bank lenders providing emergency credit with an SBA guarantee or as an emergency conduit for SBA originated credit.

All of these steps have one singular goal, providing emergency liquidity to U.S. small businesses in days, not weeks or months. Federal, state, and local authorities must take swift and decisive action to ensure that small businesses have access to capital to weather the coronavirus storm. Small businesses are often touted as the backbone of our economy. They not only employ more than 40% of our private sector workforce, they are force multipliers in their communities, supporting other businesses, supply chains and bolstering communities. Unless our government takes decisive action, we fear that this crisis will break our economy’s back and leave thousands of small businesses and millions of employees in dire straits.

Scott Stewart is CEO of the Innovative Lending Platform Association, a leading trade association of online small business financing providers.