During the Great Depression, countless businesses collapsed. In 1932 alone, 15 million people were unemployed, which made up more than 20% of the population at the time.
Despite this, some businesses thrived. Proctor & Gamble, for example, knew people still needed to buy soap. So while other businesses were slashing their marketing budgets, P&G invested in new avenues, such as radio broadcasts.
In 1933, the business launched its first radio serial called Oxydol’s Own Ma Perkins, paving the way to what are now known as soap operas.
Admittedly, the Great Depression wasn’t known for thriving businesses, but that era also ushered in the need for governments to divert money to help support businesses and workers, and to stimulate a struggling economy.
History’s century of economic assistance
As history has proven, assistance programs crop up in times of economic struggle. During the Great Depression, President Franklin D Roosevelt signed the Emergency Relief Appropriation Act, freeing up nearly $5 million to help battle unemployment. And as recently as 2009, the United States government passed the American Recovery and Reinvestment Act (ARRA)—$787 billion to help stave off hardships for workers and small businesses.
U.S. businesses witnessed a tsunami of change when the COVID-19 pandemic exercised its global reach. Just as every person was impacted by the virus, businesses were quickly faced with an onslaught of transformations when state and federal governments drew a line between essential and non-essential work.
As a result of this designation, even businesses with strong foundations were forced to shutter, and millions of people lost their jobs, virtually overnight.
The U.S. government—like those in many other countries—pushed through a new economic package in response to alarmingly high unemployment spikes and businesses in peril. The $2 trillion package included direct payments for individuals to help stimulate the economy as well as $367 billion earmarked to provide assistance for small businesses.
While the original funding was quickly exhausted, the house has passed an additional $484 billion federal funding program that includes $310 billion more to assist small businesses.
Current challenges for businesses
The U.S. Small Business Administration (SBA) points out that businesses are facing challenges in many different ways.
It might be that employees are forced to shelter in place with their families and cannot come to work. It may be that market demands are changing. For example, a business such as a restaurant may be forced to close its doors because of social distancing mandates. Or, a business may be up and running, but cannot easily get inventory or is experiencing gaps in its supply chain because of partner businesses that are experiencing hardships.
Imagine being a business that has an employee that tests positive for COVID-19. Or an ‘essential’ customer-forward business such as a grocery store or other retail establishment. Staying in business means a hefty portion of your operating budget needs to go toward frequent cleaning and sanitizing as well as process and structural changes to ensure proper social distancing.
Avenues for business assistance
Of course, not all businesses are small businesses, and many larger ones are in jeopardy as well. The Federal Reserve, for example, is lining up a lending program for larger businesses that would traditionally raise funds through large capital opportunities.
- Main Street Lending Program:
This program circumnavigates stringent limitations that prevent the Federal Reserve from lending to businesses directly. It’s putting in place a “special purpose vehicle” that would lend or purchase assets from a bank that does provide business loans.
Details for Main Street funds are still being hammered out, as of mid April, but a Reuters article by Howard Schneider suggests the focus may be in businesses with 500 to 10,000 employees.
- Main Street Emergency Grant Program (MSEGP):
Another potential funding stream under development, this program is being developed for SMBs and nonprofit agencies that are being impacted by the pandemic. It will be available through grants from the Treasury Department.
If the MSEGP comes to fruition, grants would be forgiven if a business restores its payroll to 80% within 12 months after the end of the COVID-19 emergency, or would roll to a repayable loan if a business doesn’t restore payroll to 80% after that year.
Various SBA loans provide ready assistance
Already in effect, the SBA offers low-interest loans for working capital for businesses impacted by the pandemic. These loans are for both small businesses and private nonprofit agencies. The businesses must be in a region that has applied for Economic Injury Disaster Loan assistance—which covers all U.S. states and territories.
- Economic Injury Disaster Loans:
Offered by the SBA, businesses can get up to $2 million each with an interest rate of 3.75% for small businesses and 2.75% for nonprofits.
- Advanced SBA loans of up to $10,000:
According to SBA guidelines, this loan advance is for businesses experiencing a temporary loss of revenue, doesn’t need to be repaid, and funds will be available within three days of a successful application.
- Express Bridge Loan Pilot Program:
This program is for businesses that need another option to help make ends meet until they’re able to receive an Economic Injury Disaster Loan. This program is for businesses that already have a relationship with an SBA Express Lender and need to quickly access up to $25,000.
- Paycheck Protection Program:
Also offered by the SBA, this loan was created to help businesses keep workers on payroll. These loans are available through any SBA 7(a) lender or participating federally insured institution or credit union.
The SBA will forgive a Paycheck Protection Program loan if a recipient business keeps all its employees on payroll for eight weeks, and if the loan is used for payroll, utilities, rent, or mortgage interest.
Assistance programs aren’t limited to COVID-19
Obviously, the SBA was in existence long before the current global crisis. Beyond helping entrepreneurs plan their businesses, help them launch, and give advice as businesses are growing, the SBA has numerous funding programs in place, including other loans, grants, and surety bonds.
Additional government assistance for businesses impacted by COVID-19
The wide variety of SBA initiatives are part of many programs have been created and enacted in recent months, thanks to the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
Also known as the Stafford Act, the law was put into effect in 1988. It essentially provides a systematic approach to disasters by encouraging assistance through coordinated federal and state efforts and providing access to federal assistance programs.
- One of the immediate decisions put in place by enacting the Stafford Act was the Department of Treasury’s announcement that the IRS will delay Tax Day from April 15 to July 15. The deferment gives business owners more time to pay taxes without incurring interest or other penalties.
- The U.S. Department of Agriculture (USDA) traditionally provides oversight on rural areas, farms, natural resources, and agriculture. It has funding available for small and mid-sized farms making guaranteed operating loans, both during current hardships, but also during other challenging times not related to the pandemic.
- Additionally, the Export-Import Bank of the United States (EXIM)—an agency developed to support American jobs by helping facilitate exported goods and services—provides financial assistance for U.S. businesses to thrive in global markets. In response to the current challenges, the EXIM has taken several measures to help businesses, which includes some fee waivers and other deadline extensions.
Assistance from states, cities, and the greater business community
It isn’t just federal agencies that are reaching out to businesses during the restrictions put in place to stem the spread of COVID-19. Numerous states and city agencies are taking measures to help businesses within their reach as well.
Zenefits, a SaaS subscription business helping customers with human resource issues, has created an exhaustive list of assistance by state, county, and city. The list is updated as new information comes in and provides program details as well as links to the various programs.
In addition, many private businesses and nonprofit agencies have offered their assistance. A recent Forbes article lists nearly 30 businesses helping with economic relief. These services come in a variety of different ways, from cash assistance to waiving merchant fees.
Businesses looking to the future
One thing has been made abundantly clear over the last few months.
We’re alone, but we’re in this together.
They say it takes a village to raise a child, but as the business ecosystem is learning, our economic health is dependent on countless agencies, businesses, and individuals coming together and lending a hand.
Moving ahead, businesses also need to embrace change. The enduring legacy that P&G built during the Great Depression is a great example of trying new strategies to survive.
As Piers Fawkes recently suggested in a post-Coronavirus trend published by the United States Chamber of Commerce: “Sometimes the way we always did things needs to change, so we move on to different tools, means and formats—and then once again, we will meet up with each other and still laugh and play, eat and dance.”