Struggling U.S. Startups Still Waiting for Viable Relief Package
TLDR: Congress is back in session following the August recess, and Senate Republicans plan to vote as soon as tomorrow on a “skinny” coronavirus relief package. It is widely recognized, however, that the legislation is unlikely to advance through the House. That’s why it’s important for lawmakers from both sides of the aisle to work together to craft a legislative package that strengthens small business loan programs and provides long-term support for the nation’s startup community.
What’s Happening This Week: Senate Majority Leader Mitch McConnell (R-Ky.) announced plans for the upper chamber to vote on a slimmed-down coronavirus relief package as soon as tomorrow, although it seems the bill will not garner bipartisan support and “is headed nowhere.”
There is a sense of agreement across Congress that more economic relief is needed. House Democrats introduced a $3 trillion coronavirus relief package in May, but the Senate has not advanced that bill. Bipartisan negotiations between congressional Democrats and the Trump administration over what to include in the next relief package—the so-called “Phase Four” of federal relief—fell apart last month before a deal could be reached. And the latest Senate GOP package would offer $500 billion in coronavirus relief, significantly less than the House proposal and less than the $1 trillion package that was previously introduced by Senate Republicans in July. Overall, lawmakers remain divided over a wide range of policy issues that need to be addressed in the next package.
Without an agreement on the next relief package, startups, small businesses, and Americans continue to wait for Congress to offer much-needed relief to combat the economic uncertainty caused by the ongoing COVID-19 pandemic. Critical lifelines for businesses and workers, such as Paycheck Protection Program (PPP) loans and $600 in enhanced unemployment benefits, have expired without Congress taking steps to strengthen or extend the programs.
Why it Matters to Startups: Many startups and entrepreneurs are in desperate need of emergency relief to continue operating amidst the coronavirus pandemic, and they have been waiting months for policymakers to offer a viable relief package that provides more targeted assistance for struggling businesses. Despite Senate Republicans moving forward with their own relief package, there are clear signals that the latest proposal is unlikely to advance.
The startup community—and Americans all across the country—need lawmakers to unite around a package that offers real, substantive support for those affected by the pandemic. Startups in particular are critical drivers of the country’s economy, and policymakers need to prioritize support for these hubs of future employment opportunities when crafting a serious Phase Four package. These small businesses created over three million jobs last year alone, and have accounted for approximately 30 percent of employment gains from 2010 to 2018.
Many of these early-stage firms, however, have lost access to critically needed sources of capital as a result of the outbreak and are in immediate need of targeted federal relief to weather the COVID outbreak with their operations intact. Previous federal programs, such as PPP loans, offered startups and other small businesses short-term financial assistance to keep employees on their payrolls. But the program expired last month, and startups are still stuck navigating questions about their PPP loans—including loan forgiveness requirements, nebulous guidelines, and murky eligibility rules—as they wait for Congress to offer additional financial assistance. As over 100 CEOs from some of the nation’s largest firms noted in a letter last month, policymakers need to provide startups and other small businesses with long-term loans beyond PPP that offer more flexibility for businesses and offer partial or full loan forgiveness.
Engine first conducted a survey of startups in April that showed that entrepreneurs want policymakers to focus on more targeted relief efforts moving forward. After spending months speaking with startups and entrepreneurs across the United States about some of these additional proposals, we found that the startup community believes policymakers should pursue a variety of additional relief proposals—such as federal equity investments, forgivable loans, tax credits, and grants—in the Phase Four package to further support the country’s entrepreneurial community. We previously outlined these policy proposals in a letter to House and Senate leaders in July.
These proposals closely mirror those laid out in the letter from the CEOs, and would provide struggling early-stage firms with the long-term support they need to survive the protracted economic uncertainty caused by the pandemic. By providing startups with additional relief options, such as revamped R&D tax credits and investor tax credits, policymakers would be providing entrepreneurs with the tools they need to bet on their long-term success.
The policy proposals outlined above would strengthen and build upon existing loan programs, such as the PPP, and would ensure that startups are receiving the support they need to continue driving our nation’s economy. If policymakers are truly concerned about making sure financial relief is going to small businesses in dire need of support, then they will work to ensure the startup community receives the support it needs in the next relief package.
On the Horizon.
Protocol is holding a virtual event at 9 a.m. PT tomorrow to discuss the state of the cloud and infrastructure tech.
The Wall Street Journal is holding a virtual discussion tomorrow at 8 p.m. on the future of social media with executives from Facebook and Citizen.
The House Small Business Committee is holding a hearing tomorrow at 1 p.m. on “Kick Starting Entrepreneurship and Main Street Economic Recovery” in the wake of the coronavirus pandemic.
