Americans May Be Ready to Spend But Some Businesses Aren't Ready to Sell.
The coronavirus pandemic has hit hard. More than 100,000 Americans have died. Businesses nationwide shuttered, and more than 44 million people have filed for unemployment insurance since mid-March. The stock market wobbles. However, as the economy reopens, and many Americans benefit from federal assistance, businesses across the country may be in line for a healthy dose of increased consumer spending.
"If jobs are coming back relatively quickly," which the May jobs report indicates, spending should pick up, says Scott R. Baker, an associate professor of finance at Northwestern's Kellogg School of Management. Baker recently co-authored a study for the National Bureau of Economic Research, which found that consumers curtailed spending since March, while incomes remained largely untouched. Baker suspects that consumers largely pushed off purchases because of financial concerns or because the businesses they'd typically patronize weren't open.
This spending hiatus pushed the U.S. savings rate to a record high of 33 percent in April--boosted in part from federal stimulus checks of up to $1,200 per person, depending on income. Americans are notably bad at deferred gratification, a trait that will favor companies that can meet any uptick in demand as the economy continues to reopen.
The House passed bipartisan legislation Thursday to give small businesses more flexibility with the loans they received during the coronavirus pandemic to keep their businesses afloat.
The Paycheck Protection Program (PPP) Flexibility Act, authored by Rep. Dean Phillips, D-Minn., and Chip Roy, R-Texas, passed with a 417-1 vote and now heads to the Senate.
"Millions of small business owners in this country are one step closer to meaningful relief," Phillips tweeted after the near-unanimous vote. "This is what's possible when leaders listen, act and collaborate.
During the pandemic, Congress allocated $659 billion to small businesses in PPP loans that could be converted to grants if they met certain requirements. The new legislation loosens some of the restrictions on the loans that businesses found too burdensome given that many are still closed or operating at reduced capacity due to prolonged stay-home orders. The legislation extends the time to use the money from eight weeks to 24 weeks. The bill eliminates the cumbersome 75/25 restrictions that forced businesses to spend 75 percent of their loans on payroll and only 25 percent on other operating expenses like rent and utilities. The formula changes to 60/40 percent. For loans that aren't forgiven, businesses would have more time for repayment, from two years to five years.
The noise TRA has been making on the PPP loan and needed changes is working. Senator Schumer is introducing a bill that will have many of the fixes they want. The pressure is on and they know we need fixes and they know it is the restaurant industry that is making the most noise. Key things that are within the proposed plan include:
Moving from 2 years to 5 for repayment
Changing the 75/25 split so you can make it work for you
Extend the forgiveness period until the end of 2020
Change the covered period from eight weeks to 12 or 24 weeks
On a call, they specifically asked about any fixes being made retroactive, and it was confirmed they would indeed apply. Note, on Tuesday they moved the Safe Harbor (the period of time when you could simply return your loan and not use) from May 7 to May 14. They believe this is so Treasury can release guidance on forgiveness early next week. In summary, it would be great if the Treasury could give us several of these fixes, but if they will not, in Phase 4 aka CARES 2.0 we believe the key items we need will be addressed. We also believe tax credits and state allocation of funding will be a big piece of the bill.
Today TRA signed on with the AHLI regarding liability. They know we need liability protection with the current environment and believe signing on to this and making it part of CARES 2.0 will be important.
They also made great progress this week on pulling together our “Blueprint for Recovery” and this plan includes the creation of a Restaurant Recovery Fund that will be driven from the state level. Kelsey and I are putting the finishing touches on this over the weekend with the goal to bring to the governor and our legislators next week. We feel strongly that we need state support in the recovery and cannot bear all the costs of getting our restaurants back on track. Remember, we were closed due to government mandate and have done everything to support public health. With this proposed fund, we feel we can ask for a fair financial recovery plan supported by the State of Texas and dollars secured from the CARES Act. Our Blueprint for Recovery plan also includes consideration on taxes, expansion of the current alcohol waiver, and relief from any pending regulatory changes. We need to create the best possible environment for our restaurants to succeed.
They had an opportunity to meet with several bar owners and operators are helping to craft a plan to get them open as soon as possible. They hope to have the framework of a plan that we can complete by early next week. This will be submitted to the governor’s office, like they did with the Texas Restaurant Promise, with the goal to provide a comprehensive plan to safely reopen bars. While it will be the Governor’s team and his medical experts that have the final say, we know giving them a plan helps a lot. We have more than 5,000 bars in Texas and they need our help getting customers safely back in the door. We are stronger together.
The COVID-19 outbreak has wreaked financial havoc around the globe, leaving many small-business owners struggling in its wake. According to the National Federation of Independent Business (NFIB), as of March 30—still early in the crisis—92% of small businesses said they had suffered negative effects as a result of the pandemic. Just 5% of small-business owners said they had experienced no effects at all.
While the short-term outlook for small businesses varies greatly by industry, it’s important to consider what recovery mode will look like once the economy begins to return to a state of normalcy—or establishes a new normal. Having an exit strategy in place for after COVID-19 can help you be prepared to hit the ground running and rebuild. If you’re not sure what your coronavirus exit plan should include, this guide can help with getting your business back on track.
1. Assess the Financial Damage
The first step in developing a rebuilding plan for COVID-19 is determining just how deeply your small business has been affected.There are different layers involved, starting with the hard numbers. If you haven’t updated your financial statements—such as profit and loss or cash flow statements—recently, it’s helpful to do that now. You can then compare them to last year’s numbers to see how much your business may be down. And while only a small percentage of business owners say they’ve benefited from the pandemic, 3% according to the NFIB, it’s possible that the damage might not be as bad as you think.
"It’s never to early to begin planning for re-opening! Our team has built what I believe is a very strong phased approach towards responsibly re-opening our venues in what is sure to be a challenging environment. I wanted to make this plan public in the event that it is useful to some, as well as to collaborate with others who may have their own plans. We are stronger together!" - Mitchell Roberts CEO of EVO
A few key points of advice to those looking to establish their own plans:
1.) Expect and prepare for heavy lead times and unexpected costs. Operating in the upcoming “new normal” will almost certainly require equipment that you most likely do not have. (Masks, Touchless Thermometers, Sneeze Guards, etc.) These items are currently seeing 2-3 week lead items. Get ahead of that.
2.) Don’t forget your team members. I’ve seen a lot of great guest-focused precautions, but don’t forget to take care of your staff too, as they are the ones on our front lines.
3.) Last but not at all least, weigh the impact of public perception. As important as it is that our guests ARE safe, it’s equally important that they FEEL safe. Public Perception will be the fuel that ignites our return to normalcy.
Here are some of the steps they will be taking in EVO restaurants
- reducing table capacity to 50%
- limiting groups to no more than 4
- removing bar stools from the bar
- using disposable paper menus
- sanitizer on every table
- masks required unless eating
- mask & nitrile gloves required for servers
Currently exploring mobile ordering as well.
On March 27, when both branches of Congress and the White House came to an agreement to provide sweeping financial assistance via the $2.2 trillion CARES Act, many of us in the restaurant industry cheered with a big sigh of relief. This pandemic, and the consequential shut-down of an entire industry that relies upon the gathering of people - at a moment when people cannot gather- had already shown that no restaurant is unsinkable. With slim margins in our industry to begin with, restaurants of all sizes and flavors were vulnerable and laying off people by the hundreds. Indeed, both Shake Shack and Union Square Hospitality Group needed to make those tough decisions too, furloughing or laying off hundreds of team members throughout our respective companies—one a publicly traded company, the other an independent restaurant group.
Restaurants function as the lifeblood of the U.S. economy and the nation's spirit. The bulk of the over $800 billion that restaurant-goers spend on dining out flows right back into the economy with much of that impact going to the very small businesses this PPP loan was intended to reach. The CARES Act was touted as the largest economic stimulus package in U.S. history and on its initial face, for restaurants, there seemed to be a lot to like in the bill.
With the country facing a prospective permanent loss of restaurants up and down the food chain, the bill arrived just in the nick of time. The onus was placed on each business to figure out how, when, or even if to apply. The “PPP” came with no user manual and it was extremely confusing. Both Shake Shack (a company with 189 restaurants in the U.S., employing nearly 8,000 team members) and Union Square Hospitality Group (with over 2,000 employees) arrived at a similar conclusion. The best chance of keeping our teams working, off the unemployment line and hiring back our furloughed and laid off employees, would be to apply now and hope things would be clarified in time.
The PPP funds are exhausted. Time for Plan B. National Small Business Town Hall #4
Learn from the expert panelists about where the CARES Act is at as of 4/17 and hear answers to small business owner's burning questions including: Where to go from here? How to use the funds? Explaining the fine print?
Jenna Saucedo-Herrera, president and CEO of the San Antonio Economic Development Foundation, answers your questions on KSAT.
Each employer must post a notice of the Families First Coronavirus Response Act (FFCRA) requirements in a conspicuous place on its premises. An employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.
Unemployment Resources for Employees
For your employees with difficulties getting through to TWC, here are some phone numbers and e-mail addresses you can share that may help:
The Paycheck Protection Program (“PPP”) is the crown jewel of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act allocates $349 billion to the PPP loan initiative in an effort to stabilize small businesses during the COVID-19 outbreak and to allow them to retain their workforces while weathering the Coronavirus storm. But while $349 billion is a staggering number, it is unlikely to be enough to satisfy the demand for capital. The appropriated funds will go fast, and it is a first-come, first-served program. Indeed, reports are already indicating that Treasury Secretary Mnuchin is seeking an additional $250 billion for the PPP loan program.
Applications for PPP loans were available for submission on April 3rd. Processing began in earnest for small businesses and sole proprietorships this week. The U.S. Small Business Administration (the “SBA”) is opening up applications for independent contractors and self-employed individuals starting April 10th. The PPP gold rush is on and there is plenty of confusion and chaos to go with it. With many PPP borrowers having received their loan proceeds, or receiving them soon, what should borrowers be doing after receiving their loan? Here are five things that need to be on that list according to Forbes,
Friday, April 3 was the first day small businesses and sole proprietors could apply for Paycheck Protection Program (PPP) loans. That day, Inc. editor-at-large Kimberly Weisul spoke with U.S. Chamber of Commerce executive vice president and chief policy officer Neil Bradley as part of the National Small Business Town Hall webinar series. Here are some of the most popular questions Inc. readers submitted during the town hall, along with answers from Bradley and other experts.
Inc. and the Chamber will hold its third town hall in the series Friday, April 10 at 12 p.m. Eastern. Registration is now open.
1. Which lenders are accepting applications for PPP loans?
The loans are being made available using a tiered rollout system, with traditional Small Business Administration lenders being the first institutions that can accept applications. Other financial institutions--including credit unions, Farm Credit System institutions, and Community Development Financial Institutions (CDFIs)--are now in the process of being added and will begin accepting applications in the coming days--if they haven't already.
Mark Cuban: How to avoid layoffs and other advice for small business owners during the COVID-19 pandemic
This weekend, billionaire entrepreneur Mark Cuban took to LinkedIn to answer questions from small business owners about what to do during the escalating coronavirus outbreak.
Cuban, who has been vocal about the importance of supporting small businesses during this time, prioritized questions about how to avoid layoffs and hourly reductions. His post had over 6,000 comments by Monday, with many of his followers popping in with their own advice.
Experiment with new ideas
“If you can find other services to offer, do it,” Cuban wrote in response to a question specifically about avoiding layoffs in the event industry, as trade shows, sporting events and concerts are being canceled. “Since you have holes in your schedule, it’s a great time to experiment with new lines of business and see what sticks.”
One of my favorite Small Business Development Center counselors, Rita Mitchell from the SBDC in Hattiesburg, Mississippi has passed along tips from top retailers for “fighting back” against the coronavirus (COVID-19).
With the coronavirus pandemic bearing down hard upon us, employers are justifiably concerned, if not on the verge of panic, about the potentially catastrophic impact on their employees and businesses. Make no mistake about it, the coronavirus pandemic is a crisis in every sense of the word: a public health and safety crisis, an economic crisis, a social and psychological crisis, a threat to all we hold dear. In just a few short days, it has brought government agencies, many public services, schools, both public and private, and businesses to a screeching halt and is threatening to devastate the lives of any employer’s most valuable asset, its employees. To minimize the impact, it is imperative that employers adopt and implement a plan for crisis management and recovery. And each aspect of your plan must take into account both the practical realities and applicable federal and state labor and employment laws to ensure success and avoid any employment-related lawsuits or agency enforcement actions.
Determine individual crisis management responsibilities. If facing a suspension or curtailment of operations (that’s most of us), identify all employees who are essential to each continuing essential business function, determine whether they will be needed on-site or can work remotely, make sure they have the necessary tools and resources if working remotely, and clearly communicate their areas of accountability and responsibility and how to perform their duties effectively
Is your question not addressed in these resources?