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March 25, 2020

How the $2 trillion federal aid package will affect Maine businesses

An agreement that would provide $2 trillion federal relief to businesses struggling from the impact of the coronavirus was approved by the Senate and President Donald Trump last night.

The agreement will provide billions in loans to businesses up to 500 employees — which would cover a wide swath of Maine businesses impacted in recent weeks. 

The bill includes $367 billion in loans for small businesses, $500 billion in loans for larger industries, including airlines, and $150 billion for state and local governments, according to published reports. 

“I’m grateful for the impact it will have. There’s a very immediate concern businesses face — by virtue of the order — find themselves closed to operations. They realize the priority of being able to retain their workforce,” Dana Connors, president of the Maine State Chamber of Commerce, told Mainebiz on Wednesday morning.

He cited, in particular, loans that would be administered through the Small Business Administration, that would provide relief to companies of 500 employees or fewer.

“That would cover 90% of Maine companies,” Connors said. “It would allow them to meet payroll. This allows businesses to really bridge the gap … I’m grateful to our [Congressional] delegation. They were steadfast in their concern.”

Another aspect of the relief package would provide individuals making up to $75,000 to receive payments of $1,200; couples making up to $150,000 would receive $2,400. Expanded unemployment benefits increase the maximum benefit by $600 per week and provide laid-off workers full pay for four months.

Many Maine businesses had already shut down or were running on curtailed operations before Gov. Janet Mills on Tuesday added additional restrictions to non-essential businesses. Many restaurants and retailers have already endured days or even weeks of being shut down. 

Will relief come soon enough?

While business leaders in Maine are grateful for the aid, some expressed fear that it will come too late for some businesses already on the ropes. 

“Our concern is that aid may be too little, too late for many small businesses that have had to close doors and lay off workers,” said David R. Clough, Maine state director for the National Federation of Independent Businesses.

He cited a JP Morgan Chase study of 600,000 small businesses that showed that the median had enough liquidity to last 27 days. Restaurants had the least liquidity, enough to stretch 16 days, while real estate companies had the most, at 47 days.

“However, it’s a very promising that aid bill that includes forgivable loans for small businesses. Money could be used to maintain jobs or rehire workers (paycheck protection), pay rent or meet debt obligations,” Clough said.

“The latest aid package also helps small employers meet the new paid sick leave requirements on a dollar-for-dollar basis so that the business is not harmed by cash flow timing. Small business owners want to do everything possible to keep people employed, meet the needs of customers, keep the business viable AND still protect the health of employees and the public, comply with the Gov. Mills’ order affecting essential and non-essential business operations.”

Perspective from an entrepreneur

David Stone, Portland-based entrepreneur and founder of CashStar and Forager, said his initial impressions were that the $367 billion in small business loans “is great for Maine, since we are a small business state with 99.3% of all businesses in the state considered small, and employing 285,000 Mainers.”

“The devil, of course, is in the details,” Stone added. “How will it be administered? Will there be stipulations and qualifications Or are all [small-to-medium sized businesses] be eligible? Are our banks able to process and respond quickly, especially during this mostly virtual work space time, and will the paperwork and admin not be burdensome and easy?”

Stone also suggested that the payments to individuals and families may not be enough. “Payments should go on until the virus is under control,” he said. 

But he also worries about the longer term impact of the relief plan. 

“How are we going to pay for all of this when the bill comes due? Expect higher taxes down the road for sure,” he said. “Nevertheless, the stimulus is the right strategy now.” 

Thoughts from a business mentor

George E Casey Jr., CEO of Stockbridge Associates LLC and who mentors business leaders through Vistage groups and boards, said the relief action is much needed.

“Most of the businesses I deal with, through both my Vistage groups of CEOs and the boards I am on, have already taken the drastic actions needed to have a reasonable shot at surviving,” he said.

“They have already laid off or furloughed their staffs and in many cases all but shot down their operations under state issued mandates. Very few Maine businesses have the depth of capital reserves to retain workers when there is little or no income coming in.”

Like Stone, he cautions that that federal money may take longer to make its way through the banking system than some businesses realize — in May, at the earliest. Tourism-related businesses may have an especially hard time stretching already-thin off-season cash flows. 

“The smart companies I know are already doing their SBA loan applications and figuring that it will be May before the loans might start,” Casey said. “The strategy right now is to figure out how to survive at least until then.”

“Whether Maine businesses can hang on long enough to take advantage of the capital and whether those who lend and invest will be willing to take a risk on fellow Mainers will be the ultimate deciding factors,” Casey added.

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