Washington's Sad Neglect of Small Business

Long after the coronavirus pandemic recedes, one memory will linger: the disgracefully low regard that Washington D.C. has shown for the U.S. small business community.

Just look at the way the distribution of Paycheck Protection Program funds, the $349billion specifically earmarked by the CARES Act to help little companies, has gone.

A week after PPP loan applications opened, The New York Times was noting in an April 10 article "the thousands of small-business owners at risk of being shut out of the government effort, known as the Paycheck Protection Program, because of limits set by lenders grappling with overwhelming demand. These loans...could be a lifeline for struggling businesses-- if they can get them."

But the lifeline snapped the week after that: By April 16, the program's allotted funds had been exhausted. Even worse was the way they'd been distributed. "More than 25% of the total pot went to fewer than 2% of the firms that got relief. They include a number of publicly traded companies with thousands of employees and hundreds of millions of dollars in annual sales," the news agency Reuters reported.

Yes, some progress was achieved--for that problem, at least--when the warring factions of the White House, the Republican-majority Senate and the Democratic-controlled House of Representatives agreed on an additional $484 billion in aid to small businesses, along with funding for hospitals and coronavirus testing measures--finally delivering on a pledge to help these operations that are desperately in need of federal assistance. Voting on the proposal is expected to occur later this week.

It's about time.

Foot-Dragging

Washington's foot-dragging on passing legislation to aid small businesses, which have been devastated by the state and federal guidelines mandating that citizens stay at home as much as possible, is a sign of tremendous neglect.

For businesses that exist week to week or on a month to month basis, depending on a steady stream of customers--restaurants, dry cleaning establishments, non-chain drug stores, bodegas, hardware shops and the like-the effect has put many small operations on the verge of collapse. Multiply this outcome by the thousands across the nation and you come up with a picture of a grim present as well as a highly uncertain future for the mom-and-pop venture of America.

"Some will fail - that's the stark truth," Julia Chatterley, a business anchor on CNN, said bluntly on April 16.

The following night, no less of a small-business expert than billionaire Mark Cuban--he of the popular television reality show Shark Tank as well as an early internet entrepreneur and owner of the Dallas Mavericks NBA franchise--remarked that the post-coronavirus economy will not have anything close to a miracle elixir for this segment of the U.S. commerce community.

"This won't be a top-down recovery," Cuban said on the April 17 edition of the PBS show Firing Line with Margaret Hoover, suggesting that small business owners will have to fend for themselves, once the nation and the world return to whatever will be regarded as "the new normal."

Pre-Pandemic Upheaval

Even before the Coronavirus pandemic threw our lives into a constant state of upheaval, small business owners have had it tough. All across the country, skyrocketing rents have caused many beloved establishments to fold or declare bankruptcy after years, even decades in business.

Yes, stores always come and go, particularly in the big city. But when a local merchant closes up shop for the last time, a neighborhood feels the loss personally and the fabric of day-to-day life invariably changes forever. Something significant is gone: the reassuring presence of a familiar face, a symbol of good old- fashioned hard work, a role model for kids of the same ethnicity.

Even more, we lose a sense of the can-do, entrepreneurial spirit that has always marked our country. And if the replacements are part of a national chain or franchise--as they so often are--we threaten to lose a serious sense of diversity, as well. The newcomers won't share the same desire to maintain traditions as their predecessors, especially if they have to operate according to a corporate playbook.

Cause for Cynicism

Now, small firms face what appears to be an insurmountable economic obstacle. Not only they, but their customers, are hurting: In March, the U.S. economy lost 701,000 jobs due to the pandemic, ruining a decade-long sustained record of advances.

Of course, the COVID-19 crisis blindsided everybody. Still, you can't blame small business owners if they have a dose of cynicism toward Washington.

What else can they feel when the tony Ruth's Chris Steak House was one of the first public companies to reveal that it got a government-backed loan to keep people on its payroll. Ruth's Hospitality Group Inc., an outfit with more than 5,000 workers, received $20 million in forgivable loans on April 7, according to a securities filing--four days after the Small Business Administration launched the application window on the Payroll Protection Program.

Other companies with 500-plus employees have benefited too.

At least Shake Shack, the popular fast food chain, had the social responsibility (along with the instinct for good public relations) to report will return the $10 million Paycheck Protection Program loan it received to withstand the health crisis. Shake Shack, which has dismissed or furloughed hundreds of its employees, originally needed the boost, its CEO, Randy Garutti, and its founder, Danny Meyer, said. The publicly traded company, whose stock price has plunged 60% from a 52-week high of more than $102 a share last September, said it procured additional resources late last week through an "equity transaction."

A Rigged Game?

Now, we can debate forever the value of funding a fancy steak or a burger chain versus a family-owned bodega on, say, the South Side of Chicago. Still, it seems like the small businesses are playing a rigged game in which the referees have already decided which side will emerge victorious at the final buzzer.

Washington's inattentiveness can seem even more galling because the politicians themselves recognize the problem. "This is a solvable situation if we can just put aside the partisanship," Oregon Sen. Jeff Merkley noted on MSNBC's program Meet the Press Daily on April 16.

In today's fractious Beltway, however, that is one big "if."

Jon Friedman is a New York-based business journalist and an adjunct professor at Stony Brook University.