What the coronavirus relief bill offers for small businesses

The $2 trillion coronavirus relief package the U.S. Senate is expected to vote on Wednesday offers as much as $367 billion in loans to the many small businesses across the country hurting due to the outbreak.

The proposal includes provisions to entice companies large and small to keep workers on their payrolls even if they temporarily shut down. It also hikes support for workers who’ve been laid off in any event or who have had their hours and pay scaled back.

Forgivable loans

In all, the plan earmarks a total of more than $375 billion in forgivable loans and grants to small businesses and non-profit organizations. That’s aimed at helping employers maintain their workforces and help cover rent, utilities and other expenses.

Self-employed, independent contractors and sole proprietors are also eligible for help. Small employers with existing Small Business Administration loans will be relieved of the burden of paying them; instead, the SBA will pay the loan principal, interest and fees for six months.

Disaster loans

According to a summary of the plan from the office of Democratic Senator Patrick Leahy of Vermont, the bill also provides $562 million to ensure the Small Business Administration can cover Economic Injury Disaster Loans, or EIDL, to businesses.

That funding is in addition to assistance provided in the Keeping American Workers Employed and Paid Act, which authorizes $350 billion worth of 100% guaranteed SBA loans, a portion of which the agency will forgive based on allowable expenses.

The package includes $10 billion in direct grants for businesses that don’t qualify for EIDL loans, and $17 billion to have SBA step in and make six months of principal and interest payments for all SBA-backed business loans.

No panacea

The cash infusion can’t come soon enough, analysts say. A recent survey of small businesses found that half could continue operating for no more than three months if the business impact from the virus persists, according to Goldman Sachs.

The proposal will allow many households and business to keep running in the short-term, but it is unlikely to fix the larger trouble caused by the dearth of federal guidelines to protect public health, according to Jeffrey Bergstrand, a professor of finance at the University of Notre Dame’s Mendoza College of Business.

The cash will result in “simply postponing closure of businesses and personal bankruptcies,” noted Bergstrand, a former Fed economist.

“The lack of a majority of U.S. states imposing shelter-in-place and the recent prospect of less federal government support for shelter-in-place will cause uncertainty to rise again, stifling a possible recovery and potentially prolonging the recession – and deepening it,” Bergstrand offered.

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