Cory Booker and Marco Rubio Host Senate Panel on Small Business Financial Crisis

WASHINGTON, DC — The Senate Small Business and Entrepreneurship Committee, chaired by Marco Rubio (R-FL), held a hearing on Thursday on the Paycheck Protection Program (PPP). A renewal of the program, which helped save millions of businesses across New Jersey and nationwide, would throw a lifeline to struggling enterprises. 

“PPP saved up to 55 million jobs, including up 4.5 million in manufacturing, with an average firm size of just 20 employees,” Rubio said in hailing the program as a tremendous success. “The Paycheck Protection Program is the single largest federal fiscal policy program enacted in recent history. It has also been the single most effective relief program passed by Congress.”

The work that the PPP began has been successful, but incomplete, according to Rubio. State and local restrictions are still in place that are hurting restaurants, gyms, spas, and entertainment venues including movie theaters and concert halls. 

“It is imperative that a PPP2 stimulus package is passed to help small businesses. We are limited to 25{a25bda0f8ab6dac90e68079d6f038584ef6ac53f1f4621de3ad526e35cd6c0d6} indoor capacity, and outdoor dining is ending because it’s too cold to eat outside,” said Sean Flannery, owner of Sheelen’s Crossing Pub & Bistro in Fanwood.

“After this, there’s only one thing left to do, that’s to shut until the nicer weather next year,” added Flannery, whose establishment has cut back the number of its employees and its hours of operation. “If we get PPP money, we can keep our normal hours and maintain staff.”

Overall, there is bipartisan consensus on the importance of the PPP program and the need for Congress to fund a second round (“PPP2”). Committee members include Sen.Cory Booker (D-NJ), co-sponsor of The RELIEF for Main Street Act that proposes creating a $50 billion fund, operated by Treasury, to provide seed money to cities, counties and states to seed and scale small business. The funds can be tailored based on the financial needs and conditions of local borrowers. The money would support very small businesses (fewer than 20 employees), minority-owned businesses, small companies in low-income and rural communities, and businesses outside the mainstream banking system. The funding would complement to options like the PPP and the Economic Impact Disaster Loans (EIDL) program. 

This week Biz2Credit, an online lender, released an analysis of the small business ecosphere since the pandemic first hit. The Biz2Credit Small Business Economic Indicator Study is based on data directly from the financial transactions of tens of thousands of companies. It found that about 60{a25bda0f8ab6dac90e68079d6f038584ef6ac53f1f4621de3ad526e35cd6c0d6} of businesses closed due to COVID-19 at some point and companies that closed experienced a whopping 87{a25bda0f8ab6dac90e68079d6f038584ef6ac53f1f4621de3ad526e35cd6c0d6} drop in revenue compared to 2019. The study also found that many companies are cash flow negative at the moment, which means their costs exceed their revenues.

“Restaurants, for example, paid their workers with PPP money while they were closed. When they were allowed to open up, they incurred the cost of personal safety equipment and sanitizing products. Then purchased inventory to get ready for indoor diners who never came,” Arora said. “Their costs went up, but the revenue from operations did not match it. The same is true for other industries, including gyms, nail salons, and small retailers.”

“Washington lawmakers must enact new stimulus plans (PPP2) fast. While large corporations can access capital markets, small businesses must carefully monitor revenue and adjust costs in direct relation to their cash inflows,” Arora warned. “Many firms have been operating at a negative cash flow for months. If they don’t get financial help soon, I fear that thousands of them will close forever — some already have.”

First Home Bank CreditBench President Tom Zernick may have summed it up best when he told the senators: “We need to create a business vaccine” to ensure these business communities survive.