Gov. Newsom and the Legislature should immediately develop a major small-business relief program for businesses that need the most help.
By Josh Reeves
Josh Reeves is founder and CEO of Gusto, email@example.com.
Pat Fong Kushida
Pat Fong Kushida is president and CEO of the CalAsian Chamber of Commerce, firstname.lastname@example.org.
Julian Cañete is president and CEO of the California Hispanic Chambers of Commerce, email@example.com.
Edwin Lombard, Special to CalMatters
Edwin Lombard is president and CEO of the California Black Chamber of Commerce, firstname.lastname@example.org.
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Nearly half of Californians who work in the private sector – 7 million people – work in small businesses. Small businesses make up 99.8% of California businesses and, sadly, due to COVID-19, those small businesses are closing at an alarming rate, with those owned by women and Black, Indiginous and People of Color closing at an even faster pace.
Many more of them will fail while we wait for Congress to act. This is why we call on Gov. Gavin Newsom and the Legislature immediately to develop a large-scale small-business relief program to support those businesses that need the most help. This can be done in an extraordinary session or in the budget with a fast-track to implementation. What matters most is that it happens without further delay.
As California works to get the pandemic under control, small businesses are crippled by shutdowns, restricted operations and decreased traffic. We’ve seen many of our California small businesses navigate this crisis with agility and creativity.
But these businesses are facing new challenges: while revenue has cratered, operational costs are skyrocketing. The vast majority of small businesses are only partially reopened, and many cannot fully operate outdoors, especially with unprecedented heat waves, rolling blackouts and raging fires throughout the state. Many businesses have put in place caps on the number of customers they can serve at a time. And, on the cost side, companies are now required to purchase new safety equipment and extra cleaning supplies to serve the few customers they do have.
Some businesses were able to stay afloat using the federal Paycheck Protection Program. Gusto’s June PPP Impact report showed that Paycheck Protection Program loans were beneficial for the small businesses that actually received them. The study found that hiring and rehiring rates between April and June were nearly twice as high for those that received PPP compared to companies that did not.
But while the Paycheck Protection Program was a lifeline to some businesses, millions were left out, particularly very small businesses, minority- and women-owned businesses. Less than 2% of PPP loans went to Black-owned businesses, 8% to Asian-owned businesses, 7% to Latinx-owned businesses, and 16% went to women-owned businesses. Among Black-owned and Latinx-owned businesses, only 12% reported receiving the funds they requested. The Paycheck Protection Program was especially challenging for sole proprietors, and more than 88% of minority-owned businesses fall in that category. In California, 82% of small businesses have no employees and were thus unlikely to be able to use the Paycheck Protection Program.
And these are the small businesses that need it the most. Black-, Latinx-, Asian-, and women-owned businesses were significantly more likely to shut down during the initial months of the pandemic, and were more likely to be located in the hardest-hit geographic zones.
It is time for Newsom and the Legislature to step up and fill the gaps left by the federal Paycheck Protection Program.
We urge California policymakers to implement a statewide initiative modeled after the Paycheck Protection Program – with improvements – to protect our small businesses from failure. And California should prioritize those left out of the federal program, specifically minority-owned businesses, sole proprietorships and businesses with fewer than 50 employees.
Small businesses are the backbone of our economy. Their survival is vital to the economic success of communities and families across the state. Small businesses include those we all love – our favorite neighborhood restaurants, salons, gyms, retail shops and more. Together, they employ millions of Californians – and they need help to survive this crisis.