Retailers turn to government for help in a time of need
Friday was the first day small businesses — including thousands of retailers dealing with forced closures — could apply for loans as part of a $2.2 trillion coronavirus rescue package from the federal government. The rushed program, not unsurprisingly, got off to a rough start.
The Paycheck Protection Program (PPP) allocates $349 billion in federally-guaranteed SBA 7a loans to assist businesses with under 500 employees. The loans are forgiven if a business uses the funds to retain workers for eight weeks or rehire for positions it cut in the wake of the pandemic.
Technical glitches plagued the rollout as thousands of businesses flooded banks with calls and emails. Banks scrambled to set up lending procedures, with guidance from the Treasury arriving the night before. SBA administrators were overwhelmed as the PPP is more than 12 times the amount of SBA loans originated in all of 2019.
The overall $2.2 trillion CARES Act, the third phase of relief packages so far, is aimed at stabilizing business. More than 10 million Americans have applied for unemployment benefits in the past two weeks.
The package also provides $454 billion to support loans made by the Federal Reserve, although those loans will only focus on businesses with investment-grade debt and leaves out many chains. Other parts of the act include over $300 billion in direct payments to Americans, expanded unemployment insurance and tax relief.
The National Retail Federation said money heading to the public or other industries will help put money in customers’ pockets.
“Companies that were investing, growing and contributing to a vibrant economy just a few weeks ago have been thrust into survival mode through no fault of their own,” NRF’s CEO Matt Shay said. “They need a bridge to get through this turbulent time and back to the business of job creation and economic prosperity.”
Congress is already debating a phase-four, less-bipartisan to address recovery efforts that may include a massive infrastructure program favored by President Trump, as well as additional funding to hard-hit states, more tax relief and, potentially, tariff relief. A Business And Employment Continuity And Recovery Fund — modeled after the 9/11 Victims Compensation Fund — is being considered and may also support retailers with more than 500 employees.
- Coronavirus Aid, Relief and Economic Security (CARES) Act – The Office of Majority Leader
- Confusion surrounds launch of $349B in small-business loans – The Hill
- Thousands of applicants, zero loans: Trump’s small businesses lending program is a failure to launch – NBC News
- Frenzy and Desperation as Small Businesses Grab for Government Aid – The New York Times
- Coronavirus stimulus from Congress will bring billions to cash-strapped retailers – National Retail Federation
- ‘Our Industry Will Fail’: Retail Leaders Ask for Emergency Aid – The New York Times
- Why some of America’s best-known companies won’t qualify for bailout money – Politico
- ICSC’s CEO’s Letter to the U.S. Administration – ICSC
DISCUSSION QUESTIONS: What advice would you have for retailers about taking advantage of the federal government’s stimulus packages? Do you agree that retail should be among the distressed industries receiving emergency funds and other aid from the federal government?