After the Great Recession, larger companies needed four years to recover their contribution to the GDP, but small businesses on average took six years to rebound, according to the U.S. Small Business Administration.
With the current pandemic-driven downturn having sent the unemployment rate higher than Great Recession levels, lawmakers are concerned that the recovery for small operations might be even lengthier.
“Even before the crisis, many small businesses had trouble securing capital because of widespread bank closures and consolidations after the Great Recession,” writes NCSL fiscal policy associate Emily Maher in a new NCSL LegisBrief.
Many small businesses now face a new reality formed by restrictions meant to slow the spread of the virus—diminished demand for their products or services, changing customer expectations and the challenge of following evolving health and safety restrictions.
State fiscal offices have projected massive revenue declines. But some states that lifted coronavirus restrictions to generate badly needed economic activity are shutting down again as new cases of the virus flare-up.
The National Federation of Independent Business reports that nearly half of the nation’s 30.2 million small businesses anticipate needing additional financial support in the next six months.
Congress responded quickly, passing the bipartisan, $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act in March. The act provided relief to small businesses in the form of emergency grants, payment coverage for existing loans and the Paycheck Protection Program.
States followed with efforts of their own, including loan and grant programs to help ease the financial burdens caused by coronavirus restrictions. However, Maher writes, budgets increasingly are under pressure because states are limited in the ways they can use their payments from the $150 billion Coronavirus Relief Fund, which was established by the CARES Act. As a result, state relief for small businesses might not be enough in the long term.
NCSL joined the other members of the Big 7 coalition in urging Congress to reach an agreement on additional aid to state and local governments.
“State and local governments aren’t seeking a bailout,” according to the statement. “They are seeking fiscal stabilization to immediately address revenue shortfalls caused by emergency measures enacted at every level of government to contain the spread of COVID-19.”
Read the full LegisBrief here.
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