Five Facts About Government Aid to Small Businesses

The coronavirus pandemic has imperiled thousands of small businesses. The government is providing billions of dollars to help, sometimes stirring controversy.

  1. By government definition, “small businesses” can have up to 1,500 employees.

The Small Business Administration (SBA) says that depending on the industry, a small business can have “a maximum of 250 employees or a maximum of 1,500 employees.” The vast majority of U.S. companies fall under this definition, and nearly half of all American earners work for these small businesses.

  1. The coronavirus pandemic has financially clobbered thousands of small businesses that lost customers or were forced to close for uncertain periods.

“If Congress doesn’t act immediately, countless small businesses will not survive,” Brad Close, president of the National Federation of Independent Business, wrote in USA Today on April 20. Half of his organization’s members, he said, report they “can’t survive more than a month or two” without government support.

  1. The government’s first $349 billion loan program for small businesses proved highly popular – and controversial.

As part of the $2.2 trillion stimulus package enacted in late March, the $349 billion “Payroll Protection Program” provided bank-initiated loans for small businesses in distress. The legislation granted flexibility to restaurant and hotel chains, which allowed big companies with several thousand employees to qualify. The program quickly ran out of money, and people were outraged to learn that huge, publicly traded firms had received funds while small companies still waited in line.

  1. Some firms returned their loans, and the government tightened its qualification rules.

Facing public anger, several large and popular chains returned their government loans. These included Shake Shack’s $10 million loan and Ruth’s Chris Steak House’s $20 million loan. The SBA announced new guidance aimed at disqualifying large, publicly traded firms. For instance, applicants now must certify they need funds that are unavailable from any other source.

  1. The government has pumped another $310 billion into small-business loans.

On April 23, Congress approved a new $484 billion pandemic stimulus package that includes $310 billion to restart the small-business loans. As with the first round, the loans can be forgiven if recipients use the money for payroll, rent, mortgage obligations, utilities and other fixed-debt obligations in the first eight weeks.


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