Chad Otar is the President at Lending Valley, Inc, a one stop shop for business owners’ financing needs.
Since Joe Biden and Kamala Harris were officially sworn in as president and vice president last month, small-business owners across the country have been wondering how they will be impacted by this new administration.
The pandemic and ensuing lockdowns and restrictions have put small businesses under immense strain. In September, a Yelp study found that 60% of businesses on its site that had closed due to the pandemic would remain closed permanently.
The overall outlook for small-business owners and entrepreneurs in the U.S. today continues to be grim. According to the Metlife and U.S. Chamber of Commerce Small Business Index survey conducted in November, 50% of small-business owners expected to be able to operate for 12 months or less before permanently shutting down. Almost three-fourths of respondents said additional federal relief would be critical in helping their business succeed this year. Even with immediate and targeted relief, 56% of respondents said they expect it will take at least six months to a year for small businesses to get back on track.
The Biden administration has a lot of heavy lifting to do to help save small businesses. Here’s how things look to shape up in the short term for small-business owners under President Biden and what resources are available to help small businesses weather the current economic storm.
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The Short-Term Outlook
As far as the short-term outlook for small business is concerned, this administration has a number of urgent relief proposals designed to offer targeted support to small-business owners all over America.
The big push for a lot of this relief is coming in the form of the “American Rescue Plan.” The first major initiative being driven by the new administration to fight back against the economic devastation caused by the pandemic, this $1.9 trillion relief bill has $440 billion earmarked for small businesses and communities. Some $15 billion of that relief is heading directly into a small business grant fund.
There are plans for an extra $35 billion to generate $175 billion of lending and investment for small businesses. This program would also work with state and local lenders to provide low-interest financing packages and venture capital for business owners looking to bounce back.
Some of the ways the administration has proposed to get more money into the hands of business owners outside the American Rescue Plan include:
• Directing $50 billion in public and private funds and venture capital to smaller businesses across America, especially in disadvantaged areas.
• Expanding the New Markets Tax Credit to an annual $5 billion to encourage business investment and changing the program from a yearly operation to a permanent one.
• Opening up $100 billion in low-interest-rate lending across federal, state and local levels for small businesses to take advantage of.
• Providing even more access to cash and capital through the Rural Microentrepreneur Assistance Program for rural businesses hit hard by the pandemic.
Current Relief Options
Business owners looking to shore up their operations in 2021 would be smart to move quickly to capitalize on programs currently available.
For starters, entrepreneurs will want to jump on the Paycheck Protection Program (PPP) that reopened in January. Entrepreneurs have until March 31 to take advantage of this “second draw” from the PPP. The good news here is this money is now available to all entrepreneurs, whether they received PPP lending in the first draw. If this is your second loan from the PPP program, though, your business can’t have more than 300 employees (down from the 500 employee limit of the first draw).
Entrepreneurs can also capitalize on another federal relief program, the Economic Injury Disaster Loan (EIDL) program. The major difference between PPP and the EIDL program is that EIDL loans aren’t forgivable the way PPP lending packages are. EIDL loans are good for 30 years, with interest rates between 2.75% and 3.75%. All loan payments are 100% deferred for 12 months following approval, too.
On top of those two programs, the U.S. Small Business Administration also offers other targeted relief solutions for entrepreneurs and small-business owners, including:
• The SBA Debt Relief program.
Entrepreneurs looking to maximize their relief will want to check SBA cross-program eligibility to see how much help they can receive from the federal government (as well as state and local organizations).
As far as the long-term outlook for small business is concerned, much remains uncertain until we know which parts of Biden’s tax plan will come to fruition and what the small-business landscape will look after the Covid-19 pandemic is under control. Biden has been clear about his plans to raise taxes and roll back tax cuts for large corporations, but to what extent any tax changes might impact small-business owners is unclear.
It’s also impossible to know how much of this targeted small-business relief will make an impact until the U.S. rounds the corner with the pandemic. All the relief in the world won’t amount to much if it comes in one big block and businesses continue to operate under restrictions and lockdowns for another six months or a year.
Getting a handle on the pandemic and making sure America’s small-business owners don’t go under are huge challenges facing this administration. Hopefully, we’ll all be able to come out on the other side with a better, stronger, more prosperous America.