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Small Business, Outgunned in Washington, Worries About Survival
The lobbying blitz over the record stimulus package that President Donald Trump signed last week is forcing small businesses to confront a harsh reality in Washington: They can’t match the muscle that big corporations wield on Capitol Hill.
Small-business advocates say they are on the losing end of the $2 trillion coronavirus-rescue program, even as Trumptouts it as the means by which the federal government will keep small business alive in the face of mass shutdowns.
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The reality, they say, is far different. By oneestimate, small businesses may need more than $1 trillion to replace lost revenue over the next three months. Yet the main pool of money allocated by Congress for hundreds of thousands of restaurants, hardware stores, theaters, dry cleaners, clothing stores, beauty salons and the like is just $349 billion in the form of forgivable loans over two months -- as much as $10 million each, and only if certain conditions are met.
Another concern: Individual restaurants and hotels that are part of large, multinational chains or owned by private-equity firms will be able to take advantage of the program. They could squeeze out small businesses in the chase for the $349 billion pot of money, which will be allocated by community banks and other Small Business Administration lenders on a first-come, first-served basis beginning Friday.
“Politicians of both parties talk a lot about small business. It’s right up there with apple pie,” said Stacy Mitchell, co-director of the Institute for Local Self-Reliance, an advocacy and research group. “But when it comes right down to it, much of what they actually do tilts the playing field in favor of big businesses at the expense of small businesses.”
Getting fast relief to small-business owners and their workers is central to shoring up the American economy as it confronts a severe recession because lockdowns intended to slow the virus’s spread. Small businesses employ almost half of the private workforce and have been among the hardest hit with four out of five Americans subject to stay-at-home orders.
Even though the Small Business Administration, which is managing the program, has taken steps to streamline the application and approval process, the money is about 15 times what the SBA’sflagship loan program typically oversees.
“The SBA website was really overloaded,” said Jay Barrett, the chief executive officer of Fetch! Pet Care, a pet-walking and sitting service in Washington, Alabama and other locations.
With business in March down about 84% from February, he’s been trying to get his application in for an SBA disaster loan, an existing program for small firms that suffer economic injury. They are available only up to$25,000 for an unsecured loan, and up to$2 million if collateralized. “We actually did our applications for the first round at about two in the morning Eastern time because the site kept crashing.”
Yet another issue is that the funds come in the form of forgivable loans rather than direct grants. Many small-business owners, facing an uncertain future, are worried about taking on debt, given that their revenue in many cases has gone to zero overnight.
The Small Business Majority, which advocates for small firms, had unsuccessfully sought $250 billion in direct grants and $250 billion in loans. John Arensmeyer, the group’s founder and chief executive officer, said the package Congress passed isn’t big enough and won’t get firms the money they need quickly enough.
“We lobby but we don’t have the firepower bigger businesses have,” he said. He added that large companies were able to get tax breaks they have long sought, such as more generous deductions for renovations. “They took advantage of the situation, where we were focused just on what are we doing to keep these businesses alive,” he said.
Washington is teeming with powerful trade groups that advocate for big companies -- from technology giants to pharmaceutical manufacturers to Wall Street banks -- but small-business owners lack an organized voice. Partly that’s because there are so many of them -- the fewer companies in an industry, the easier it is to organize and advocate for policies. They also tend to be swallowed by trade groups dominated by larger members.
‘Plenty of Champions’
The main business lobbying group, the U.S. Chamber of Commerce, is primarily a vehicle for large corporations. The most prominent small-business organization is the National Federation of Independent Business, which has been lobbying to get relief to small firms affected by the virus outbreak.
During negotiations over the bill, the NFIB, which refers to itself as “the voice of small business,” focused much of its effort on expanding the loan-forgiveness terms, according to its senior director of federal government relations, Kevin Kuhlman. While the original draft would have only forgiven payroll expenses for small business, the group was able to broaden it to include other expenses like mortgage interest and utilities, Kuhlman said.
Kuhlman also said lawmakers and Treasury Secretary Steven Mnuchin have indicated they are open to seeking more money, if needed. “We’ve got plenty of champions to say we are happy to revisit it,” he said. “No one knows what the right gross number is on this.”
The group, which says it has about 300,000 members and claims to be non-partisan, largely pushes a Republican-focused agenda of deregulation and tax cuts. Among the “Policy Victories” named on its website are various tax breaks and successful litigation against environmental and labor regulations, including an Austin, Texas, paid sick-leave ordinance.
The NFIB famously fought Obamacare’s mandate for individuals to have health insurance, going all the way to the Supreme Court, where it lost in 2012.
Last year, the NFIB spent less than $5 million on lobbying. The Chamber of Commerce, by contrast, spent nearly $60 million. Small businesses represent about half the nation’sprivate-sector gross domestic product, yet the amount the NFIB spent to influence U.S. lawmakers and agencies is less than the $5.7 million thatInternational Business Machines Corp. alone spent in 2019.
Even though the NFIB was successful in broadening the expenses covered in the stimulus package and winning tax cuts, some small-business owners see the federation as an ideological organization for its pursuit of conservative causes, rather than an effective advocate for small firms and their employees.
According to the Center for Responsive Politics, Freedom Partners Chamber of Commerce, a group funded by the conservative Koch family and its network of donors,reported giving the NFIB $600,000 in 2013 and $1.5 million in 2012. NFIB does not have to reveal its own donors and dues-paying members.
‘Very Happy’ Members
Adam Temple, an NFIB spokesman, said such criticisms are old news and “clearly not from anybody that’s serious about getting things done” in the current environment. “What we’re hearing from our members is that they are very happy” with the bill, Temple said. “We’re listening to our members and advocating on the issues they care about most.”
Under the small business loan package, the U.S. will forgive the debt if it’s used for payroll costs, mortgage interest, rent and utility payments, and only as long as a firm maintains the same number of employees it had before the coronavirus crisis. In addition, all employees must receive at least 75% of their prior pay.
Companies that reduce their headcount or slash wages more than 25% will see a reduction in loan forgiveness. Companies can rehire employees in coming weeks without penalty.
$350 Billion Rescue Program" target="_blank">Small Businesses Fear Hold-Ups in $350 Billion Rescue Program
The loans, however, won’t necessarily go to the mom-and-pop outfits many imagine. They are available to restaurants and hotels with up to 500 employees per location, which could let large companies or those with many locations -- say,Starbucks Corp., for example -- take advantage of the program as well as individual properties of large hotel chains. It also allows franchises likeMcDonald’s Corp. to benefit.
The provision allowing companies with multiple locations to benefit, which was not in the original drafts, was pushed by theAmerican Hotel & Lodging Association, according to a person familiar with the matter.
For large corporations, the stimulus package provides about $500 billion in loans and other assistance that will be managed by the Treasury Department. As with small businesses, the loans will be forgiven if the companies comply with certain restrictions on employment, executive compensation and stock buybacks.
Yet big companies, unlike small ones, can potentially get out of those requirements. The law gives Mnuchin the authority to waive them, according to Lisa Gilbert, the vice president of legislative affairs at Public Citizen.
For now, small business groups are turning their attention to thenext stimulus package that Congress takes up and that is sure to set off another lobbying frenzy.
“Big corporations hijack the legislative process, winning government favors that are not available to their smaller competitors,” said Mitchell from the Institute for Local Self-Reliance. “This increases their market share, which in turn gives them more scale and leverage in the political process. And on it goes. Rinse and repeat.”
— With assistance by Bill Allison, Mark Niquette, and Emma Kinery