While the first round of PPP loans distributed by Credibly and other small business lenders has helped preserve companies over the previous months, those funds are rapidly dwindling even as the global pandemic rages on. And as negotiations within Congress continue for another round of stimulus, U.S. corporate leaders are urging lawmakers to sign the stimulus package through to ensure the recovery of many small businesses.
That potential new stimulus package, still undergoing contentious negotiations from both parties, would provide a second round of PPP loans for businesses that are in desperate need of financial aid.
Former Chairman & CEO of Starbucks Corporation (NASDAQ:SBUX) Howard Shultz wrote a letter, signed by over 100 CEOs, pressing lawmakers to save these small companies who employ almost half of all private-sector workers in the U.S. Shultz outlined the gravity of this time-sensitive issue both for its impact on the U.S. economy, as well as the livelihood of many American business owners and workers.
“Small businesses are too critical to our country’s economic strength to let it fail. From retailers and restaurants to consulting firms and manufacturers, small business owners are facing a future of potential financial ruin that will make the nation’s current economic downturn last years longer than it must,” Shultz writes.
The New Stimulus Package
In Washington, this message has met with gridlock. Congressional Democrats and Republicans have each attempted to push through their own legislation that has been subsequently blocked in the chamber controlled by their political rivals.
This happened most recently with the proposed $300 billion “skinny” stimulus package from Senate Republicans. House Democrats argued the bill did not do enough to provide relief for Americans struggling to make ends meet, with more restrictive unemployment benefits and no funds allocated for direct stimulus payments.
Nevertheless, conversations between the parties have continued. In a 25-minute phone call with White House Chief of Staff Mark Meadows, Speaker of the House Nancy Pelosi discussed the Democratic Party’s willingness to meet Republicans in the middle with a $2.2 trillion stimulus package.
President Trump has stated that he is willing to pass a $1.3 trillion stimulus package, almost $2 trillion less than the Democrat’s original proposal of a $3 trillion stimulus.
“We have said again and again that we are willing to come down, meet them in the middle — that would be $2.2 trillion. When they're ready to do that, we'll be ready to discuss and negotiate," Pelosi told reporters following the 25-minute phone call.
Pelosi continued, telling reporters that the House is not willing to accept anything less than the proposed $2.2 trillion. This has prompted concerns for many business owners who are in need of a second loan following the end of the first PPP loan on August 8, 2020.
Small Businesses Are In Need Of Funding
Genevieve Villamora, co-owner of Bad Saint, a trendy restaurant in Washington, D.C., spoke with ABC News about her experience as a small business owner. Villamora has had to cut has to cut 75% of her staff, but said that the PPP loan given in April will help to pay her remaining staff through the end of the year. Although, the restaurant is currently focusing on covering costs as they struggle to stay afloat.
For some small businesses, the money ran out months ago. In an article from The New York Times, Ken Bodenstein, who runs The Goddard School of Westport with his wife Kristen, took out a PPP loan for $148,000 to cover payroll for their 21 employees.
The money lasted for 3 months until it eventually ran out on June 5. With only about 15% of the children who were attending pre-pandemic returning, Bodenstein and his wife were forced to furlough or lay off more than half of their staff.
The daycare was shut down for two months with no revenue, yet the Bodenstein’s were still required to pay the school’s $30,000 monthly rent as per their landlord’s request, which does not include insurance, utilities and other expenses. Bodenstein said that a second PPP loan would be a godsend for his business allowing them to avoid an eviction and catch up on accumulating bills.
Many small businesses are running out of funds and the effect this will continue to have on American workers and the U.S. economy is dire.
“While the Paycheck Protection Program (PPP) has provided short term relief for many, that lifeline is coming to an end,” Schultz writes. “Most small businesses don’t have enough cash in the bank to weather more months of reduced revenue and customer traffic. To survive until a vaccine is widely available, millions of small businesses will require longer-term support from the federal government.”
It is uncertain when or if Congress will approve a second stimulus package to provide another round of PPP loans. With a standstill between both parties on the appropriate amount of money to sign-off on, a compromise needs to be made.
Also unclear is whether or not Democrats will approve of the $500 billion stimulus bill as the amount is significantly lower than their $2.2 trillion.
“Tens of millions of Americans have already lost their jobs in this pandemic. Allowing small businesses to fail will turn temporary job losses into permanent ones,” said Shultz. By year end, the domino effect of lost jobs — as well as the lost services and lost products that small businesses provide — could be catastrophic.”