APRIL 17, 2020

News Roundup for Small Business Owners

The latest news about relief efforts for small businesses, particularly via the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).

• Bloomberg put together the map below based on the SBA PPP report I mentioned yesterday. It shows how uneven the distribution of the loans was by state. The analyst who put this together, Ernie Tedeschi, looked at the total PPP funding received by state and divided by each state’s total small business payroll. While there could be many explanations for this distribution, and it could just be coincidence, one can’t help but see a “red state vs. blue state” difference. The top 5 states were Nebraska, North Dakota, Kansas, South Dakota, and Maine. All but Maine backed Trump in 2016. The least funded were New Jersey, Nevada, California, New York and D.C., all of which supported Clinton. Again, this may be a population issue (that more populated states, which tend blue, had more businesses apply and thus created a “bottleneck” in processing, but with the partisan bickering about how the next round of CARES should be appropriated, expect this to be politicized in the days to come. (Bloomburg, Politico)

2016 Presidential Election Results (Source: Real Clear Politics)

• In addition to geography, it appears that industries were also funded unevenly by the PPP. It’s obvious that the hardest hit industry is likely Accommodation and Food Service, yet it placed fifth in funding by industry, behind Construction; Professional, Scientific, and Technical Services; Manufacturing; and Health Care and Social Assistance. (New York Times)
• A chuckle for all the finance nerds out there.

• For those of you who didn’t receive a PPP, it might be a good time to look at the Employee Retention Credit (ERC), which was also part of the CARES Act. In short, this program is a fully refundable tax credit for small businesses equal to 50% of wages, up to $10,000 per employee. To qualify, a business must be EITHER fully or partially shutdown by government decree or show a drop in year-over-year quarterly revenue of 50% or more. In addition, and this is important, that business must NOT have received a PPP. Essentially, if you get ERC, you will be absolved of your employer-tax contributions for social security. If the amount of credit exceeds your quarterly payment, the employer will get a refund for overpayment. Learn more here and here. (H/t to Trevor Loy for reminding me of this via Twitter; he’s a great follow!)
• Obviously the CARES Act was a disaster on many levels, not just for small businesses. Fast Company looks at the relief package from a broad perspective, touching on its shortcomings and reasons for it. A big reason for the mess is that government hasn’t truly adapted to the digital age. The programming language that most agencies use for their software systems(COBOL) was outdated 40 years ago. (Fast Company)
• This bit goes a little further than small business, but is something that is very disconcerting to me, so I wanted to call attention to it. So far, many workers who have been laid off in the last four weeks haven’t received unemployment benefits. In Florida, claims are estimated to be about 800,000 in the last 4 weeks, but of those, only 4% have received payments. Gig economy workers were promised that they’d qualify for unemployment, but applying for it is tricky and confusing, and many independent contractors find themselves at the back of the claimant line. Add to this that unemployment is a state-funded program backed by insurance trust funds and half of the states didn’t meet the Department of Labor’s solvency minimum, which is being able to pay benefits for 1 year to similar numbers as the Great Recession. Some perspective: in the ENTIRE 2008 Great Recession, about 9 million jobs were lost; in the last 4 weeks, COVID-19 has forced 22 million jobless claims. Initial prognosis is that some states could be insolvent by the end of May. Why do I mention this here? Well, most companies are anticipating a fairly quick recovery in their financial projections. But if everyone’s broke, who will be going out to eat even if restaurants are allowed to open again. Something to keep an eye on. (New York Times, CNN)

Previous Entries:

Thursday, April 16 | Wednesday, April 15 | Tuesday, April 14 | Monday, April 13 | Friday, April 10 | Thursday, April 9 | Wednesday, April 8 | Tuesday, April 7 | Monday, April 6

Masterplans is a veteran-owned business that specializes in providing the highest-level business development consulting located in Portland, Oregon. For 17 years we have helped thousands of entrepreneurs launch new businesses and put their ideas in motion. Now, more than ever, we want to see these same businesses survive the largest economic disaster of our generation.