The data painted a dark picture for Main Street retail this week, with a new Facebook & Small Business Roundtable study showing that over 30 percent of small to medium-sized businesses have either failed or don’t see a way forward due to the pandemic. While the situation is dire, a new idea is surfacing that could help retailers start to dig out of a deep ditch.
It’s called Main Street Regenerators. Put forth by a consortium of Philadelphia-area advocacy groups and academics, a Regenerator is a kind of public-private partnership that will coordinate available resources and find new ones to help individual businesses survive.
“As the economy shifts from rescue to reopen, Congress and communities alike need to focus on places rather than just products in the design, finance and delivery of recovery aid,” said Bruce Katz, director of Drexel University’s Nowak Metro Finance Lab. “To that end, we propose that communities establish (and the federal government support) Main Street Regenerators to speed the revival of our business districts – downtowns, town centers, commercial corridors, university districts and classic Main Streets themselves – where community-serving enterprises congregate and co-locate.”
According to Katz, Regenerators will first build upon and coordinate existing groups, such as merchant associations, business improvement districts, community development corporations and entrepreneurial incubators and accelerators. They would also connect these community-based groups to local governments, corporations, universities, banks and philanthropists, among others.
“Main Street Regenerators are needed to accelerate, and share the benefits of, the economic recovery,” he argued. “The notion that a quick revival of Main Streets will be driven by millions of individual small businesses acting on their own defies the laws of finance. Owners of collapsed small businesses will suffer from damaged credit and deep reductions in their savings and investments (and those of their family and friends), making it difficult to restart their enterprises. This situation is only marginally more manageable for businesses that remain open, whose ability to re-stabilize will depend on the establishments and institutions surrounding them. Alternative financial products that are low-cost and have flexible terms are needed for both groups, but do not exist at scale.”
Katz sees five different roles for these groups, ranging from landlord relationship mitigation to buying groups for goods and services to financial access facilitation. The groups can also act as a bridge between underserved neighborhoods and the federal government, which he believes still must play an active role in helping Main Streets, especially in the inner city, to recover from the pandemic.
“The federal role will extend beyond capital,” Katz noted. “The scaling of Regenerators will depend on the rapid codification and sharing of new models and norms as they emerge. Great care will be needed to differentiate between the evolution of Regenerators along Main Streets –which, prior to the COVID-19 crisis, were operating at full capacity – and those located in distressed urban, suburban and rural communities, where longstanding issues around vacancies and local capacity were major impediments to revival.”
Cincinnati, for example, already has a Regenerator-type organization called Cintrifuse. The group has already raised more than $90 million in venture capital for more than 600 startups, more than half of which have attracted late-stage investments.
And that access to capital is critical. According to the Facebook & Small Business Roundtable survey, half of SMBs reported applying to government sources for capital support, 11 percent applied for bank loans and 6 percent applied for private-sector grants.
“The bottom line is, the revival of Main Streets and Main Street businesses – essential to the broader revival of the U.S. economy – will not occur through the relief programs and lending mechanisms that have been deployed to date,” Katz said. “The next phase of COVID-19 recovery must include support for business districts and small businesses alike. Main Street Regenerators, by building on existing institutions and employing new functions, could be a vehicle for reviving the places that define our communities. They could help catalyze not only the regeneration of places that are central to community life, but also the reimagination of the uses and activities of these places.”