Small businesses across the nation are hurting like never before. We are all fighting an invisible enemy unlike anything we have ever encountered. Leaders in Washington, D.C., have responded, but there is mounting evidence in the most severely affected areas of the country that emergency federal programs are not working as intended.
The $660 billion Paycheck Protection Program, administered by the Small Business Administration, is a powerful tool designed to pump liquidity into the market and keep small and midsized businesses afloat, as well as working men and women on the payroll and off the unemployment line.
Many businesses in the hardest hit areas of the U.S., including New Jersey’s neighborhood new car and truck dealerships, have qualified for and received SBA money, only to discover later on in the loan process that the formula used by the SBA to calculate loan forgiveness penalizes employers who cannot immediately and safely rebuild their workforce to pre-COVID-19 levels. While many businesses can easily qualify for seven-figure loans, eligibility for loan forgiveness is hard to come by for businesses at the epicenter of the pandemic.
Simply put, the aggressive back-to-work bias of the federal stimulus package directly conflicts with state government stay-at-home orders still in place throughout much of the Northeast, and the businesses right here in New Jersey that are hard-hit by this crisis will pay the price.
This back-to-work strategy is beneficial in areas of the country that have not yet been severely affected by COVID-19. But, here in the Northeast, it is not working. The rush to qualify for SBA funds before they run out — and the obligation on the part of banks to disburse funds within 10 days after approval — means federal stimulus money is being pumped into the local economy before cautious state and local authorities are ready to relax stay-at-home orders and fully restart the economy.
The PPP is an acknowledgement on the part of the federal government that supporting small and midsize businesses is the fastest and most efficient way to get money quickly into the hands of working men and women. But, in the many parts of our country, the program is not working because:
- Executive orders in the most hard-hit areas require people to stay home, which has consumers and workers unwilling to venture out or return to work;
- OSHA rules and an employer’s obligation to protect employee health and safety make it difficult to call workers back to work at pre-crisis levels without creating a public health risk or an unsafe work environment; and
- Many employees are under the mistaken impression that unemployment insurance eligibility rules have been relaxed and now allow workers to refuse to return to work if they fear exposure to COVID-19 on the job.
The reality is, employers in high-operating-expense businesses like auto retail that also operate in certain high-cost locales like the New York metro area, also happen to be the most severely impacted. Employment at pre-pandemic levels is unattainable right now and would run counter to state and local government directives to “stay home,” as well as an employer’s obligation to ensure a safe place for workers and customers.
In practice, the federal loan forgiveness formula unfairly penalizes business owners who put the health and safety of their customers and employees first by adhering to strict state and local stay-at-home orders.
There is $350 billion in federal stimulus money that has been pumped into the economy over the past two weeks, and Congress has just approved — and the president signed off on — another $310 billion that will be on the street soon. But business owners, employees, customers and cautious government officials in the hardest-hit regions of our country are not able to take full advantage of the program, and, as a result, our economy will ultimately suffer for it.
Gov. Phil Murphy, Sen. Bob Menendez, Sen. Cory Booker and our entire Congressional delegation must act now to cut through the red tape and align federal economic stimulus policy with state public health policy. Revising the SBA loan forgiveness formula as it is applied to businesses in the most severely affected regions of the U.S. would be a good place to start.
James B. Appleton is president of the New Jersey Coalition of Automotive Retailers, the statewide trade association that represents New Jersey’s 500-plus franchised new car and truck dealers. Auto retail is a $36 billion per year business in New Jersey, alone, and new car dealerships employ more than 39,000 men and women across the Garden State.
