In summary

California has made an unprecedented investment in small business, if we keep it up they can lead our post-pandemic economic recovery.

By Carolina Martinez, Special to CalMatters

Carolina Martinez is CEO of CAMEO, a California micro-business network, cmartinez@CAMEOnetwork.org.

Not long before Congress passed its latest COVID-19 relief package, California authorized a comprehensive $7.6 billion stimulus package of its own, with more than $2 billion allocated for small businesses. That legislation built on previous actions to keep California’s Main Streets afloat during the pandemic.

In all, it’s an unprecedented investment in California’s entrepreneurs. 

With rising hopes that the pandemic may soon come to an end, the state’s economic recovery plan must continue to invest in our most effective job and wealth creators: small businesses and the ecosystem that supports them.

California was one of the first states to go into lockdown – and while this was a necessary step for public health, the impacts on small businesses have been dramatic. At the start of the pandemic, California’s 4.1 million small businesses employed almost half of all workers, but COVID-19’s repercussions came quickly. An April 2020 poll by Small Business Majority found that 92% of small-business owners already were reporting negative impacts. 

The state of California stepped in to help, providing, among other things, $2.5 billion for a small business grant program, a $100 million Main Street Tax Credit, and an interest-free extension for businesses filing less than $5 million in sales tax. Recognizing how difficult it is for many entrepreneurs, especially women and people of color, to start a new business, the state also waived the $800 minimum license fee for new businesses.   

These actions undoubtedly saved thousands of small businesses and jobs. Yet, another poll in December 2020 found that 56% of small-business owners were still reporting reduced revenues compared to the same period the previous year. Six in 10 reported struggling to pay rent or mortgage on their commercial spaces. And 17% of business owners of color said they were likely to permanently close sometime in the next three months; 12% of white business owners said the same.

This highlights the fact that small businesses are still struggling and need continued support. Many have been unable to access relief from the federal government – only 17% of small-business owners who received a loan from the Paycheck Protection Program got the full amount they requested. The numbers were lower for entrepreneurs of color – at 14% versus 25% of white business owners.

Fortunately, the California latest relief package includes $2.1 billion in grants of $5,000 to $25,000 – quadruple the pandemic-related grant assistance previously available. In announcing the law, Gov. Gavin Newsom acknowledged that the “backbone of our economy is small business. We recognize the stress, the strain that so many small businesses have been under and we recognize our responsibility to do more.” 

For years, policymakers spoke about the importance of small businesses to our economy but did not follow up with significant action. The pandemic – and the specter of small businesses failing in mass – has changed that dynamic. California policymakers have made real investments in our small businesses in the last year. Now, as we shift from crisis to recovery, small businesses need the state to build on that progress and keep investing in the health of our Main Street entrepreneurs and the organizations that support them.

Small-business recovery is the foundation of our statewide recovery – and indeed, the recovery of the nation. The best way to get California’s economy back on track is to put our small businesses in a position to bring their employees back to work, create new jobs and bring vibrancy back to our neighborhoods. 

If continued investment is done right – placing an emphasis on helping women entrepreneurs and small-business owners of color – it can open new pathways to economic opportunity for communities that have historically been marginalized and are disproportionately impacted by the current crisis.

If California can get this right, our communities can not only recover; we can transform as a model system of resiliency that responds to the needs of these business owners. 

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