What financial relief exists for small firms running out of cash?

Welcome back to Big Trends in Small Biz, a weekly newsletter bringing you the news, tips and trends to help you with your business. Click subscribe above to be notified of future editions, and follow the hashtag #LinkedInSmallBusiness to join the conversation.

States are putting their reopening plans on hold as cases across the United States continue to surge, keeping closed businesses that were setting up to resume services after being shut for months. Texas and parts of California that have seen large spikes are going one step further, ordering businesses that have reopened to close their doors again. Florida is allowing bars to remain open but not permitting them to sell alcohol, effectively shuttering them.  

The Centers for Disease Control and Prevention now estimates that more than 20 million people in the United States may have contracted the virus, far higher than previous estimates or official case counts.

The pandemic doesn’t appear to be letting up anytime soon, with the World Health Organization warning that “the worst is yet to come” as confirmed global infections exceed 10 million. “We all want to get on with our lives, but the hard reality is that this is not even close to being over,” WHO director-general Tedros Adhanom Ghebreyesus said.

In the meantime, businesses could run out of money before the economic recovery takes shape. Cash balances at small firms dropped 12.7% at the onset of the pandemic, according to a JPMorgan Chase Institute analysis. As with other aspects of the pandemic, minority business owners are getting hit even harder, and the analysis highlights the disparity among business owners. Black-owned firms saw their cash reserves decline by 26% and Asian-owned companies saw their cash drop off by more than 60%. Asian Americans have experienced discrimination since the start of the outbreak with many consumers shunning their restaurants and stores.

Many of the millions that received Paycheck Protection Program loans won’t survive and are wondering if they’ll be expected to pay back the loan. Since owners who took out PPP and EIDL loans under $25,000 weren’t required to put up collateral or personally guarantee the loan, they could default and not have their assets seized, experts tell CNBC. But defaulting could damage one’s credit score.

Still, getting access to financial services is a challenge for all small businesses and the PPP is just one program. What other financial relief exists? For those who did receive funds from the Paycheck Protection Program, what does the forgiveness aspect of the program that is coming due for many business owners look like? I talked with Luz Urrutia, CEO of non-profit lender Opportunity Fund, about this and more: 

Latest Developments

• The International Monetary Fund revised its forecast downward for how much the global economy would contract, projecting it would shrink 4.9% with a cumulative loss of $12 trillion to the global economy. 
• The Treasury Department expected its Opportunity Zones would prompt investment in low-income areas and create economic equality. A new study from the Urban Institute, though, shows the money hasn’t gone to the small businesses and community development projects intended to benefit from the program.
• New York, New Jersey and Connecticut have imposed 14-day quarantines for those coming from states with a high number of cases.
• Restaurant spending could predict the virus’ spread, according to data from JPMorgan Chase.
• Billionaire investor Robert F. Smith was behind the move to get Community Development Financial Institutions, or CFDIs like Opportunity Fund, as approved PPP lenders. This profile is worth a read.

Conversations For You

• The sixth edition of LinkedIn’s Workforce Confidence Index, a bi-weekly snapshot of worker sentiment across finances, career prospects and job security, shows small businesses and their workers are eager to return to the office. But employees do have some qualms about returning. While their peers at larger companies trust their employers to have appropriate cleanliness and sanitization practices in place, employees at small businesses say that is their primary concern about going back to the workplace. See what workers are saying here.
• The construction industry, meanwhile, saw an uptick in confidence, according to the index, fueled by optimism in job security, career opportunities and finances. Workers and small business firms in the industry are talking about what the coming months have in store.
• Toronto is the latest major metropolitan to reopen in Canada, allowing restaurants, some malls and hair and nail salons to resume services. Businesses reopened with various safety protocols in place, including reduced capacity and installing plexiglass to create distance between patrons and workers. Business owners are sharing what the reopening means for their company.

Resources

• Pennsylvania has opened applications for its program to provide $225 million worth of grants to businesses impacted by the coronavirus. 
• American Express launched “Shop Small”, a program designed to divert more money to small firms by offering card holders a $5 credit when they spend $10 or more at a U.S. small business. 
• Philadelphia’s courts are setting up a program to allow small business owners to negotiate with their creditors for more time and ways to pay off the debt.
• The city of Taylor, Michigan is offering $7,500 grants to small businesses and non-profits that have fewer than 25 employees. Applications are due by July 20.

Something Good

• Anyone else challenged when it comes to hand-eye coordination? Clearly not this guy, who has come up with a new way to bowl.
• In animal news, this golden retriever is best buds with a dolphin named Delta and it’s the best.

Big Trends in Small Business is going on a brief hiatus. I’ll be back with a new edition for you on July 21.