APPEL: Amid The Virus, Wither Small Business?

As small businesses are forced to shutter all over Louisiana, their owners are faced with questions. Will I be able to re-open and, if so, when? Can I expect my business to be as before?

We all know that small business has always been the backbone of the US economy, accounting for at least 40% of jobs. But the twin disasters of coronavirus and the oil price collapse is something few business owners have experienced. And worse, no business owner has ever faced a government-mandated business shutdown or the mandatory business shutdown of their customers.

And what has been the response from government? Well, it’s the usual, “we must protect the workers.” That is a great sentiment and important, but government has never had to make payroll, government has never had to pay a loan, government has never had to depend upon a business to feed its family. To a small businessperson when the government says that it wants to protect employees by mandating new expenses on the small business with a “promise” that it will be reimbursed, the red flags go up. No small business owner trusts government to make them whole, and worse government doesn’t understand that. The biggest fear of all, small business owners know implicitly that these types of programs, rife with red tape, are manna from heaven for lawyers who love to sue.

Compounding the problem for small businesses and their employees, government’s solution to economic revival, that is making up for shutting down businesses in the first place, is to promise a loan program. So, the businessperson looks at this and their reaction is, government wants to artificially prop me up for a time and then, if or when things improve, I will have to pay the government back plus interest? And that loan, a new liability on the balance sheet, may make additional cash flow loans from banks impossible to secure, may require a personal guarantee by the businessperson, and may be a black mark on the business’ credit score for years, making contracts and the ability to purchase materials harder to come by.

The businessperson realizes that that loan must be repaid and unless the business grows substantially there may be nothing left after paying the loan. Sadly, in Louisiana, a state where, even before the twin disasters hit, the economy was not growing, no small businessperson can feel too appreciative for a government that shuts them down and then makes them pay to try and survive. And so far, Louisiana seems to be ignoring the economic reality that has befallen us all.

So, what must be done? Well, if government truly had a sincere concern for the employees it would realize that only a vigorous revival of the small business sector will provide for long term employment and income growth. Saddling small businesses with debt is not a viable solution. Perhaps instead a formula could be created that would allow small business operators to calculate an amount equal to the difference of revenue that they made over the last three years and what they make for a year after they re-open. This would then be an amount that the government applies over time to pay back the principal and interest on a non-recourse loan that the government makes to tide them over. In this manner the small business pays its employees and the government, the source of the problem in the first place, provides so that the small business can thrive.

As I have said before I do not know whether all this mess was necessary, only time will tell. But we as a nation are committed to this path and an obligation to make employees whole is just as valid as an obligation to make small business whole. That’s only fair and just.



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