Senate Stimulus Package Should Protect Startups, Self-Employed
TLDR: As Congress continues working on a stimulus package to counteract the economic fallout from the COVID-19 pandemic, it’s important that lawmakers ensure that startups, gig workers, and e-commerce platforms receive the financial security and protections they need to stay in business.
What’s Happening This Week: Lawmakers and the Trump administration are still negotiating an economic stimulus package that would support Americans, small businesses, and industries affected by the coronavirus pandemic.
The Senate was unable to advance its most recent $1.8 trillion stimulus package yesterday as Democrats and Republicans remained divided over, among other things, whether the latest package was too generous to large corporations at the expense of U.S. workers and small businesses. The U.S. Federal Reserve also announced yesterday that it plans to roll out a Main Street Business Lending Program to complement the stimulus package’s expected expansion of the Small Business Administration’s loan program. While the details are still being finalized, the Fed said the program would “support lending to eligible small-and-medium sized businesses.”
House Speaker Nancy Pelosi (D-Calif.) introduced her own stimulus proposal after the Senate failed two separate times to advance its package. The House Democrats’ proposed $2.5 trillion stimulus plan would in part provide $600 per week to unemployed workers—including the self-employed—affected by the pandemic, and would set aside $500 billion in grants and interest-free loans for cash-strapped small businesses.
Despite the lack of progress so far on the most recent stimulus package, Senate Minority Leader Charles Schumer (D-N.Y.) and Treasury Secretary Steven Mnuchin announced last night that they had made significant progress on an agreement and believed that a deal—likely reaching almost $2 trillion—would be finalized sometime today. Speaker Pelosi also said this morning that the Trump administration and Senate Majority Leader Mitch McConnell (R-Ky.) agreed to accept several provisions from her counterproposal.
Why it Matters to Startups: Many U.S. industries are suffering as a result of the coronavirus pandemic, but it is the country’s small businesses and startups that are at the highest risk of financial insolvency if they do not receive an immediate infusion of cash. That’s why it’s so crucial for the stimulus package to ensure that at-risk small firms can access guaranteed, low- or no-interest loans in an expedited fashion in order to survive the economic uncertainty.
The first coronavirus aid package signed into law earlier this month set aside up to $7 billion in small business disaster loans available through the Small Business Administration. While these already-implemented low-interest disaster loans are issued directly by the federal government—rather than typical SBA loans that are issued by private banks and financial firms—the process has been slowed by bureaucratic requirements. Each state’s governor had to submit a disaster declaration request to the SBA to receive access to these loans, and it took the agency until this past Sunday to approve applications from all 50 states.
It’s critical for lawmakers and administration officials to ensure that the current stimulus package provides guaranteed, speedy loans to startups and small businesses that need an immediate financial boost to survive the pandemic’s economic fallout. Although negotiations are ongoing, Senate Majority Leader Mitch McConnell’s most recent Senate stimulus package calls for more than $300 billion in guaranteed loans to be issued through the SBA’s 7(a) program.
The 7(a) program—the SBA’s small-business interruption loans that are issued by banks and private financial firms—includes collateral requirements that might make it difficult for some startups that may not have sufficient collateralizable assets to obtain much-needed funding. Small businesses and advocacy organizations also warned that the loans may not be enough to support businesses that need an immediate financial boost to remain afloat, and cautioned that funding is not likely to reach the firms that need immediate support to stay open. Lawmakers must remain vigilant to ensure that needy startups operating on shoestring budgets have easy and expedited access to these loans, as well as other critical resources.
Startups in cities such as Seattle—an early hotbed of the virus—have been forced to temporarily lay off workers as a result of the economic uncertainty, a process which has allowed employees to collect unemployment benefits. But many self-employed U.S. workers—such as microbusinesses, early-stage entrepreneurs, and gig workers—are not eligible to receive these unemployment benefits, and the current stimulus package does not do nearly enough to address the economic fallout that they are likely to experience. Lawmakers should work to ensure that gig workers and e-commerce platforms are treated the same as other U.S. workers when it comes to receiving desperately needed protections.
In a recent letter to congressional leaders, Etsy CEO Josh Silverman said lawmakers need to be particularly mindful of the economic toll that these microbusinesses and gig-workers are facing as a result of the pandemic. Silverman noted that these types of workers will not benefit “from much of the important relief the U.S. government has already promised to workers and small business owners, including low-interest rate loans, emergency leave, or expanded unemployment protection.”
In order to ensure that America’s entrepreneurs and gig workers do not unjustly suffer, Silverman said lawmakers should establish an unemployment protection fund for the self-employed, ensure the continued stability of critical e-commerce platforms, and increase the income threshold of the Earned Income Tax Credit. We believe that these are necessary steps for extending equal protections to gig workers and the self-employed.
These are uncertain times for many people across the country. It’s vital that Congress and the Trump administration do everything in their power to ensure that startups, small businesses, and entrepreneurs have the financial resources and economic protections that they need to weather the economic turbulence from the ongoing pandemic. Our country heavily relies on the contributions of our small businesses, and we need to consider their immediate needs in any stimulus package.
