The crisis is hardly over, but post-pandemic reality is setting in for Main Street retail. Government program subsidies and loans have been snapped up by larger companies and mid-sized chains, and banks have capped their exposure to loan programs. The prevailing sentiment, as the crisis heads into its third month, is that more innovative government programs will be necessary to provide any meaningful relief.
A recent poll shows that 90 percent of small businesses have been negatively impacted by COVID-19. And more than 50 percent of them say they are about to close or are on the verge of closing. The poll was conducted by a San Francisco-based advocacy group called Small Business Majority, and its CEO John Arensmeyer has been a proponent of community grants that exist outside of the formal banking system that has controlled government aid up to this point.
“We’ve been advocating for grants even before the PPP was passed, knowing it would be problematic,” Arensmeyer said in a Forbes interview, referring to the Paycheck Protection Program being implemented by the Small Business Administration as part of the federal stimulus effort. “The idea of running a program through a banking system — there’s an inherent inequality there. Most small businesses don’t have a lending relationship with a bank. Some don’t have any relationship with a bank. So you set yourself up for a situation where those companies with existing relationships that already benefit from inequalities in the system, now they’re the ones in the front of the line for the loans. And there was no provision in the law to prevent that. Plus the grants in there — a $10,000 grant, $1,000 an employee, it’s a drop in the bucket.”
Other ideas include more government action regarding competitive regulation. State and local governments can do more to provide a level the playing field for small businesses, advocates say. Kennedy Smith, a senior researcher for the Institute for Local Self-Reliance (ILSR) says Main Street is facing an existential crisis without more impactful and accessible government relief programs described the current situation as “an existential crisis” for Main Streets, as reported in Route Fifty. She believes lockdown orders created a loophole that allowed large chains that offer essential retail to continue selling non-essential goods like toys and electronics. In comparison, small businesses selling similar products were forced to close. Smith pointed to it as an example of how state and local governments can leverage their positions to fix “new and legacy issues exposed by the crisis related to the supply chain, access to capital for people of color and women and social program eligibility requirements.”
Patrice Frey, president and CEO of the National Main Street Center, is a proponent of supporting existing local economic development organizations like chambers of commerce, community foundations and Main Street programs.
“These organizations are instrumental in connecting small businesses to programs that offer financial aid and services that advocate for payment deferrals or waivers,” Frey said. She also urges government officials to remember the return in investment for Main Street businesses. In Washington State, Frey said that “for every $1 it invests in a Main Street program, there is a $13 return to the public coffer” in the form of taxes and fees.
There is no shortage of other larger scale ideas. Writing in Barrons, RSM chief economist Joseph Brusuelas is recommending a Main Street lending facility that would include a $250 billion Congressional backstop combined with $1.25 billion in liquidity guarantees by the Federal Reserve. Government agencies would lend at 1 percent, branding the program “One for America.”
“In our estimation this would be a considerable step toward stabilizing financial markets and the economy,” Brusuelas wrote. “Most importantly, the move would signal to small and medium-sized entities that populate the real economy they will not be left behind to fend for themselves as they were during the financial crisis. The next months will be difficult, but there will be social and economic life on the other side of the crucible we are caught in. Policy put into place must target Main Street. It must provide bridge loans, not bailouts. It should target trade, not tariffs. Anything less will undercut the legitimacy of the policy that will reshape the American economy in the aftermath of the crisis. The fiscal and monetary authorities need to act now.”