If you own or work for one of California's nearly four million small businesses, you're understandably freaked out right now. But help is on the way in the form of a federal $2 trillion stimulus package -- $349 billion of which is for small businesses.
Why is the situation so precarious for small businesses right now?
Small businesses have on average 27 days of cash buffer, and restaurants have even less -- 17 days, according to Karen G. Mills, the former head of the federal Small Business Administration under President Obama and a current senior fellow at Harvard Business School.
"So that means if you shut down and turn off the spigot of cash coming in the door, you have 27 days until you run out of money. And when you run out of money as a small business, you're dead," she said.
What is in the stimulus bill for small businesses, and who qualifies?
The bill contains $349 billion in loans to small businesses and nonprofits with less than 500 employees. People who are self-employed, freelancers and independent contractors -- even gig workers like Uber or Lyft drivers -- would also qualify.
The big thing about these loans is that they can be forgiven. Business owners do not have to pay them back if they use the money to pay employees' salaries or rehire laid-off employees, or to pay their rent, mortgage, utilities or any other business-related debts.
How soon will these loans be available?
Treasury Secretary Steven Mnuchin has saidthat business owners should be able to apply for these new loans by the end of next week.
How can business owners apply for these loans?
The Small Business Administration works with banks to offer these loans. So once the stimulus bill is finalized, talk to the bank you already work with. Most FDIC-insured banks should be able to offer these loans, according to Mills. If for some reason your local bank can't work with you, contact a big bank like JP Morgan Chase, Wells Fargo or Bank of America.
There could be millions of loan applications to process. Are people really going to get loans as quickly as Treasury Secretary Mnuchin says they will?
Mills says this is the part of the deal that worries her the most -- especially because smaller banks aren't used to acting quickly, and, as a government agency, it can take the SBA a while to ramp up.
"The concern I've got is that we have not seen yet how the SBA and Treasury are actually going to attach this fire hydrant out to the pipes that will deliver the money into the hands of small business owners," she said.
What's going to happen on April 1 if these loans haven't been processed yet? Lots of small businesses need to pay rent.
Experts are urging landlords to be empathetic and patient, if possible. "I encourage all the landlords, if they don't receive rent on April 1, they should talk to their tenants and try to help them to go through this difficult time, because help is on the way," said William Yu, an economist at the UCLA Anderson School of Management.
Also, in the city of L.A, Mayor Garcetti has already issued an executive order banning commercial evictions. L.A. City Council is voting to approve its own bantoday, March 27. The draft of the city's ban would prevent landlords from kicking out business tenants if they can't pay rent due to COVID-19. They could still be evicted for failing to pay rent for other, non-COVID reasons, however. As soon as the coronavirus emergency is over, businesses would have to pay that rent back within three months.
I'm a small business owner trying to decide whether to lay off my employees or not. What should I do?
Many experts, including Treasury Secretary Mnuchin, are urging employers to keep their employees on the payroll and wait for government assistance.
Mills said it will be much easier for businesses to recover if they don't have to search for new employees in a few months. "We know from the experience in [the 2009 recession], when we lose small businesses, when they shut down, or they pare down their employees, it is very hard to get them back to full speed again. It's a slow ramp up," she said.
If you are a small business owner, or you work for one, or you're a commercial landlord, please let us know how all this is affecting you.
Contact reporter Emily Guerin on Twitter: @GuerinEmily or by emailing eguerin@scpr.org.
