America, along with the rest of the world, is in uncharted territory as an international pandemic meets a global economy. Businesses large and small are being immensely impacted by travel restrictions, quarantines, school closings, and mandated closures of businesses to stop the coronavirus.
There are 30.2 million small businesses in the United States, as an example. This makes up 99.9% of all businesses in the United States employing 58.9 million people – 47.5% of the total workforce.
With these small businesses at the heart of many of our supply chains, it is critically important for Procurement and Supply Chain professionals to understand the impact this crisis is having on their small and diverse businesses. In fact, as stated by Forbes on March 23rd, “a National Small Business Association member survey last week found that three in four small-business owners are very concerned about the economic impact of COVID-19. Almost half have already seen reduced customer demand. And 38% aren’t confident in the financial future of their business, up markedly from 15% in January.”
Can you imagine what would happen if 38% of the small businesses across the United States did not survive this crisis? That is 11.4 million businesses. Those could be facilities services providers, your manufacturers of unique products, your promotional item suppliers, your caterers, your recruiters, your staffing firms, the nonprofits that support your businesses, shall I go on?
With small business owners focusing on keeping their businesses afloat, making the hard choices to lay off their workforces, many of them being personal friends, and trying to figure out what is around the next corner for them, there is little time for them to focus on the many funding options that the federal and local governments offer, as well as private options that are available. Luckily, there are many options for business owners at this time, but sorting through the options and understanding how to apply accurately is not as simple.
The Good News:
To help protect the small businesses of the United States during this time of crisis, the Small Business Administration has issued an Economic Injury Disaster Loan (EIDL) declaration. This declaration makes loans up to $2 million in assistance available to small businesses and non-profit organizations. The interest rate is 3.75% or 2.75% for non-profits. With payback terms of 15 or 30 years, as selected by the SBA, that would amount to about $4,500/month per million for 30 years or $7,300/month per million for the 15-year term at the 3.75% interest rate. Most US based privately held and non-profit companies qualify for the loan, as long as the SBA determines 1) eligibility; 2) satisfactory credit; and 3) repayment ability.
There are other programs being passed to also help small businesses at the state and local level, and they vary by state to state. It is best that your suppliers check with their governor’s office on the options available to them. There are also an increasing amount of loans and grants available through private industry. These options are sometimes targeted for certain industries or groups of companies; however, they are an option to potentially explore.
The Not So Good News:
Bottom line, at this time, the most robust offering is through the SBA, and demand is high for these loans. In the over 60+ year history of the SBA, they have never had to manage this program to serve a national need. Historically, this program was used for local or regional disasters like a tornado, hurricane, or fire. And unlike the standard SBA loan process through PLP’s/banks, the EIDL applications are submitted directly to the SBA for underwriting and are funded directly by the Treasury. Given the high demand for this program, the SBA is trying to help as many as they can, but wait times are understandably long, and their website is feeling the impacts of the amount of demand, with outages occurring.
From working with many business owners through the application process to date, the application process is not as easy as it would seem. We have also had conversations with many business owners who have already submitted, but submitted unknowingly incorrectly, which could cause delays and a reduced loan amount. Unfortunately, when that occurs, there is no clear path forward to make the needed corrections.
How You Can Help:
As Procurement and Supply Chain professionals, it should be our mission right now to help protect our suppliers from shuttering their businesses for the long term. For our supply chains to reactivate in their full capacities, we need our suppliers to be ready and able to meet demands. Here are three ways to help:
- Be proactive. Do not assume that if you do not hear a supplier is struggling that they are ok. They are not. Assume that at least 38% of your suppliers are on the brink of failure. From working with many suppliers who are struggling as we speak, their customers are some of the last people they will tell, in fear of long-term impacts or, frankly, because of pride.
- Encourage Education. Your suppliers need to be educated on the options available to them. There are many free webinars being offered by Chambers of Commerce, by the SBA themselves, and Economic Development organizations. HPP is also hosting live webinars, with SBA representatives attending every Tuesday and Thursday to help educate business owners.
- Ensure Accuracy. When your suppliers start the application process for these loans, particularly for the SBA loan, they need to understand that it is critically important for their applications to be filled out accurately and that includes a narrative with the application explaining the need and the amount they are seeking.
Procurement is at the forefront of helping rebuild the economies across the globe and here in the United States. This is a mission and a calling that many of us have never considered in our careers. It is time to lead, be proactive, and serve those small businesses that have served us for so long.
Amanda Prochaska is the CEO and co-Founder of HPP, Inc. The HPP Business Recovery Program is here to assist business owners to collect all required documentation, organize needed financials and tax documents, and advise in the Disaster Business Loan Application process. For more information about the HPP Business Recovery Program and available webinars, please visit HPP Business Recovery Program.