As the COVID-19 crisis continues to wreak havoc on small businesses across the country, local and national actors have begun to realize the enormity of the economic challenge at hand. Shortly after a record high 3.3 million in weekly unemployment claims were announced, President Trump signed the CARES Act into law. The race to save our small businesses is on, and it promises to be a challenging one.
Over the past several weeks, many cities enacted local emergency relief funds to give small businesses the capital infusions they need to survive until larger pools of capital are made available through the federal government. The federal government’s CARES Act created two relief vehicles: (a) a ~$350 billion Small Business Administration Paycheck Protection Program; and (b) a Federal Reserve Main Street Business Lending Program. In theory, there would be a natural staging and sequencing of these relief packages — initially locally generated, then federally supported. In practice, it appears that the sequencing of relief packages will be anything but linear; like the public health response, this will be messy and chaotic. Many small businesses will collapse in the process. This is less a criticism of Congress and the agencies administering relief than a reflection on the complexity of the challenge before us.
Local economies have not had the luxury of waiting for the passage and implementation of the CARES Act. Across the country, municipalities, philanthropies, and related intermediaries have created emergency funding facilities for their small businesses, targeting a narrower definition of small businesses (generally 25 or fewer employees). These facilities vary widely based on the needs and capabilities of any given place. Yesterday, we detailed a typology of local funds that shows the disparate sources of capital, terms and conditions, and delivery systems organized into five main categories based on the entity leading the charge: city government funds, public entity funds, philanthropic funds, financial institution funds, and business chamber funds. From $100 million in Chicago’s Small Business Resiliency Loan Fund seeded by the City and administered by local Community Development Finance Institutions, to the Indy Chamber’s proposed $10 million Rapid Response Loan Fund, community leaders are on the front lines trying stop the bleeding.
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