With the recent replenishment of the Paycheck Protection Program, Congress and the Trump administration hope to avert a massive and catastrophic closure of small businesses amid the economic devastation of the COVID-19 crisis. But while the additional funds for the PPP are desperately needed, a successful rebound will require more than a one-time infusion of cash.
State and local elected officials will soon find that they are the next — and last — line of defense in protecting their communities (and tax rolls) from a failure of small businesses at a scale unlike any ever seen in this country. A recent study by our organization found that as many as 7.5 million small businesses are at risk in the coming months, especially those employing fewer than 20 people.
These businesses urgently need hyperlocal support systems that link businesses to resources that will aid them through the next 18 to 24 months. Fortunately, such support systems already exist in thousands of cities and neighborhoods across the country in the form of Main Street Programs, Business Improvement District associations and other kinds of downtown organizations. The local economic-development leaders who head these organizations are typically well known in their communities as trusted sources of information and as "connectors" to business support resources. They are also extremely knowledgeable about their communities' business environments and the local "players," which is invaluable in helping to broker creative solutions to get businesses through challenging times ahead.
And creative solutions will be in high demand. Small-businesses that survive stay-at-home orders, whether aided by the PPP or not, face a long and difficult recovery. Dramatic unemployment figures suggest that many Americans simply won't have the spending power they did before the crisis. Even where consumers are able to spend, their behavior is unlikely to return to pre-pandemic norms anytime soon. After stay-at-home orders are lifted, residual concerns regarding coronavirus transmission are likely to slow the recovery of the restaurants and retail and service businesses that are the heart of communities.
Business owners are likely to encounter a confusing patchwork of local, state, federal and philanthropic funding sources, and they are going to need help identifying suitable programs and navigating often-cumbersome application processes. They will also need advocates in their corner to work with property owners and negotiate lower or deferred rents, and they'll need assistance, where feasible, in transitioning some of their business to e-commerce. On this latter point, our research indicates that approximately two-thirds of small businesses have no online presence, a troubling figure given that online sales are likely to be a lifeline in the coming months.
The risk as state and local leaders look to trim budgets in the coming weeks and months is that they will cut any program that is not directly tied to health, human services and education. We've seen this before, post-Great Recession, when governments reduced or eliminated dollars for local business-support efforts. Such moves are short-sighted and have painful consequences, largely in the form of lost jobs and reductions to state and local revenue from taxes and fees. Ultimately, elected officials in many places elected to restart these programs, acknowledging that aid to local economic-development programs has a return on investment that far exceeds their cost.
In coming budget negotiations, elected officials will be wise to recognize that they are playing the long game in bringing their communities back from COVID-19. We can coax that recovery to a faster and stronger outcome if we can keep the focus of our support as hyperlocal as possible and if we can maintain the connector organizations that help small business on the ground, community by community. Ultimately, modest expenditures to support local economic-development organizations now will deliver a healthier and more stable tax base in the months and years to come.
Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.