Officials may soon approve another stimulus package, which could have significant impacts on small businesses and the economy
More and more Americans continue to struggle as we plunge into an economic downturn. The unemployment rate, though declining, was still at 11.1% for June 2020. And more small businesses are shutting down for good after all the hard hits brought by the COVID-19 pandemic.
The first wave of stimulus support came from the government in early April. But many are wondering what’s next. Will small businesses receive more support as the coronavirus continues to spread in some states? Would a new relief package deliver the same or similar benefits and programs?
The Heath and Economy Recovery Omnibus Emergency Solutions (HEROES) Act was passed in the House in mid-May, which proposed a $3 trillion relief package for Americans. However, it didn’t pass in the Senate, so the question of a second bill remains uncertain.
It’s not yet known exactly what a second stimulus package could mean for small businesses. Here’s what we do know so far about how your business could be impacted by a second round.
Second stimulus package timeline
First, let’s look at what we know about a potential second stimulus timeline.
Senator Mitch McConnell has said that a new stimulus package could be unveiled in July. But the Senate was on recess until Monday, July 20 and will be in session for three weeks. Many believe that the new relief bill could thus be authorized during that upcoming period. If that’s the case, the second stimulus could go out to Americans in August or September.
But if a bill isn’t approved before August 7, the Senate will be on recess again until Monday, September 7, after Labor Day, delaying potential government support and causing more small businesses to close their doors.
If a new bill is passed in the coming weeks, we still don’t know much about what will be included for businesses. But let’s look at what has been proposed or discussed so far.
Potential small business benefits in a new stimulus package
The first stimulus package provided assistance to small businesses with the Paycheck Protection Program (PPP). This loan program helped businesses stay afloat by keeping staff on the payroll or hiring back employees who had already been laid off due to COVID-19. The maximum loan a business could receive is $10 million.
However, even with hundreds of thousands of businesses receiving a PPP loan in recent months, and 51 million jobs supported by the loans, businesses are still struggling. According to data from the National Bureau of Economic Research (NBER), the number of active business owners saw a sharp drop, down 3.3 million or 22%, from February to April 2020.
The PPP has now been extended to early August so that more businesses can apply for the loan. But in addition to loans, what could a new stimulus package bring to further elevate struggling small businesses?
McConnell recently indicated that the new bill should include liability protection for businesses, which would protect them from lawsuits related to the coronavirus. This protection could also be retroactive.
The current administration has expressed a desire to provide tax relief for businesses like restaurants and tourism businesses, among others. Tax breaks were proposed to help businesses with the additional expenses required to implement safety measures and PPE, so that the economy can bounce back faster with more available and stable jobs.
Other inclusions that would benefit businesses include more targeted lending or grants since many of the businesses in need aren’t actually obtaining benefits. Another support could be loan forgiveness, including a blanket forgiveness threshold for PPP loans. Because these loans have complex terms, employing a blanket threshold would help small businesses avoid a lot of unnecessary administrative work or confusion.
Even though the unemployment rate is slowly declining, and the country is reopening, the full impact of COVID-19 remains uncertain. It’s estimated that more than 100,000 small businesses have closed permanently since the pandemic started, meaning the U.S. has lost 2% of small businesses. And the negative effects are far from over as the U.S. faces another surge in COVID-19 cases, and state economies may be forced to shut down once again.
If your small business is struggling to manage taxes or accounting, especially during these more challenging times, Franco Blueprint is here to help. We can also help you establish your new business or improve your cash flow, making sure you’re prepared for the future. We give you peace of mind so you can get back on track for success.
Contact the Franco Blueprint team today to learn more.