As it headed toward final passage in the nation's capital, the historic $2 trillion economic stimulus package to alleviate the coronavirus pandemic was welcomed broadly by Louisiana businesses on Wednesday.
The massive deal had elements that would put money directly into people's hands to keep them spending, as well as measures to give soft loans and direct aid to American business sectors that have been hit hardest by the near-complete shutdown of the economy.
Adam Knapp, president and chief executive officer of the Baton Rouge Area Chamber, said the most important thing about the bill is it provides funding to companies that have lost all or a significant amount of their business. The bailout package also includes $350 billion of soft loans for small businesses through the Small Business Administration.
Instead of businesses having to go to the SBA to get 7(a) loans, which now provide up to $10 million in funding, they will be able to go to local banks for the money. This will streamline the process and allow companies to get cash in just a few days, Knapp said. And businesses that have already applied for an SBA Economic Injury Disaster Loan will be eligible to get additional funding.
“Businesses can apply for a loan and the portion that deals with payroll expenses is forgivable,” he said. That alleviates the fears of businesses who are wary of taking on additional debt, but want to help employees.
Another benefit is that $10 billion has been set aside for the SBA to make $10,000 emergency grants to cover operating costs for companies.
Dawn Starns, head of the Louisiana chapter of the National Federation of Independent Businesses, a small business group, said she’s pleased with the bill’s focus. “There are a lot of provisions that deal with small businesses,” she said.
The relief package includes $350 billion in aid for companies with 500 employees or less. This includes $17 billion to help businesses repay existing loans and loans that may be forgiven as long as a business retains workers.
“The SBA is great and all, but small businesses do not want more debt,” she said. “The goal is to get cash moving into bank accounts so small businesses can pay their employees, their rent and utilities.”
Businesses with independent contractors, such as hair salons and other parts of the so-called gig economy, are also addressed in the forgivable loan portion.
The important thing now is to get the bill past Congress and onto President Donald Trump’s desk. “If we wait past this week, then the window of opportunity to really rescue small businesses is going to close,” Starns said.
The increase and extension of unemployment benefits, the direct payments of $1,200 for individuals and $3,400 for families of four below certain income thresholds, plus support for the Supplemental Nutrition Assistance Program, or food stamps, and to cover utility bills, are among the measures aimed at staving off a deep slump in consumer spending as the unemployment lines grow.
"That's the biggest benefit to us: the indirect impact of measures to stabilize the economy," said Mark Joslin, chief financial officer of Covington-headquartered Pool Corp., which sold $3.2 billion of swimming pool supplies, outdoor landscape and irrigation products last year.
"We need a vibrant economy and depend on homeowners feeling economically sound so they’re willing to make investments in discretionary products like swimming pools," said Joslin, who added that Pool Corp. has so far not put any of its 4,000 U.S.-based workers on furlough and expects the company will ride out the lock-down without having to tap any government business loan program.
Many Louisiana businesses have not been so lucky and have had to lay off employees and scramble to ensure their financial survival.
Among the hardest hit has been the hotel sector, where many large and small operators have either suspended operations completely or are operating skeleton crews to cater for a dwindling number of customers. Thousands of employees have been furloughed or put on short time.
Nial Patel, of Restic Development, which owns eight hotels in metro Baton Rouge and Kenner, said the bill is a “good first step” for the lodging industry. Demand for hotel rooms has dried up; on one recent night Patel said one of his properties had three out of 80 rooms occupied.
By forgiving loans that are used to pay employees and mortgages, the bill will keep some hotel employees from being fired, he said.
“We want to keep people on the payroll,” Patel said. “We’re still having people come in and doing work, like deep cleaning. We’re trying to use our time wisely.”
While the hotel industry is seen as one of the big winners in the bill because of a provision that allows large properties with thousands of employees to be eligible for small business loans, Patel said he wished more was done for individual franchisees.
“In the future, when they start to work on the fourth or fifth bill, maybe there will be opportunities for relief for franchisees,” he said.
The immediate need for businesses will be help figuring out what's contained in the package and Louisiana Economic Development has set up a hotline at (833) 457-0531 to deal with that.
"LED anticipates one of our biggest roles will be informing about available COVID-19 business aid through federal and state sources," said spokesman Gary Perilloux.
Paul Salles, president and chief executive officer of the Louisiana Hospital Association, which represents hospitals and health care systems across the state, said the bill will provide about $150 billion for medical providers. While hospitals have been on the front lines of the battle against the coronavirus, they’ve been caught in a crunch. Because outpatient surgeries and treatments have been canceled to deal with the pandemic, a source of revenue is gone. At the same time, expenses have gone up because of the increased staffing and measures being taken to fight the disease.
Salles said the bill creates a health and social services emergency fund of about $100 billion to help hospitals that find themselves in a financial bind. How the money will be distributed is still unknown; he expects the Centers for Medicare & Medicaid Services, along with the U.S. Department of Health and Human Services, will work out the details. The bill also will provide Medicare payment increases to hospitals and providers, including 20% more for individual coronavirus patients.
“We’re pretty happy with the overall funding for hospitals,” Salles said, noting that the original bill called for $75 billion in spending.