Speakers: Small businesses may fail by year’s end without new aid

The Greater Des Moines Partnership wants the state to help fund community projects. Shown is the restored Iowa Theater in Winterset. (Photo by Perry Beeman/Iowa Capital Dispatch)

Without new aid from Congress, small businesses will struggle to stay open throughout 2020 as the coronavirus pandemic continues, speakers told the Greater Des Moines Partnership on Tuesday.

The Partnership gathered small business experts as part of its virtual version of the annual DMDC lobbying trip to Washington, canceled due to the spread of COVID-19.

Jessica Taylor, national director of Goldman Sachs’ 10,000 Small Businesses program, said the pandemic brought a progression of feelings among local business operators, according to surveys. Uncertainty in the spring gave way to frustration over how to apply for federal aid. May brought thoughts of recovery. Then business owners in July saw their capital shrinking, and they returned to the anxieties of the early weeks of the pandemic, Taylor said. 

“It’s been a long journey for our businesses, and the uncertainty is still there,” Taylor added.

Goldman Sachs’ surveys of 860 participants in its 10,000 Small Businesses training program found many businesses had cut their staffs. “Some of our businesses were forced to cut employees big time,” Taylor said. ”The uncertainty grew into a panic.” 

That panic spilled into a Goldman Sachs survey that found 81% of small businesses polled expect the changes they made during the pandemic to be permanent, Taylor said. 

By September, 94% of the businesses surveyed had received Paycheck Protection Program aid, but 88% already had exhausted the funding. Just under a third, 32%, had laid off employees or cut wages. 

By the end of the September, Goldman Sachs predicted, 36% of the businesses will have laid off workers or cut wages, and 30% will be out of federal aid, unless Congress extends the PPP program. 

Congress has been deadlocked on extending the aid, and now is embroiled in a controversy over appointing a replacement for the late Supreme Court Justice Ruth Bader Ginsburg.

Small-business owners tend to think Congress is more interested in appeasing larger businesses than smaller ones, according to Goldman Sachs’ surveys. The surveys found 7% of respondents thought Congress prioritizes small business needs. 

Taylor said the surveys showed that Black business owners were less likely to apply for the U.S. Small Business Administration’s Paycheck Protection Program. Men were more likely than women to reopen businesses, Goldman Sachs found. 

Charles “Tee” Rowe, president of America’s SBDC, which represents Small Business Development Centers, said his organizations typically works with 4,000 clients in Iowa. That number ballooned to 63,000 during the pandemic. 

Rowe said extending PPP is important, but for many businesses a key is checking to see if there is a way to change their focus to keep making money. “The key is really revenue,” Rowe said. “How do we help them pivot?”

Kristin Granchelli, vice president of government relations for NAGGL, the National Association of Government Guaranteed Lenders, said her organization helped 60,000 small U.S. businesses get $25 billion in aid in year from one program. “There was a sense of desperation” when the pandemic started, Granchelli said. 

Now, with money running at many businesses and COVID-19 cases still rising, the businesses “need more programs, not just two and a half months of payroll,” Granchelli said, referring to PPP.

“Unfortunately, Main Street is still hemorrhaging,” Granchelli said. 

Chris Slevin, group vice president of Economic Innovation Group, said the pandemic could deal a blow to startups. “One of the lessons that we learned from the Great Recession was that startups never recovered from that,” Slevin said.

However, recent business formations have risen lately, he added. Slevin said it is unclear if that is because many unemployed Americans are trying to freelance or to form their own business while they are looking for something else, or another factor. 

Meg Schneider, the Partnership’s senior vice president of business resources and community development, noted that economic struggles often bring more innovation as people look for new ways to make a living.