Patronize small businesses, save the economy

John Kabateck
President, Kabateck Strategies

The federal government and California Gov. Gavin Newsom are taking steps to help small business in this time of dire danger, but ultimately it will be individual citizens as consumers who must save the national and state economy.

In Washington, small business interruption loans were part of the first major bill passed by Congress and signed by the president.

The bill creates a $300 billion program to assist small businesses threatened by the virus. The Small Business Administration offered Economic Injury Disaster Loans up to $2 million to help small businesses with debts, payroll, accounts payable, and other bills that result from the Covid-19 crisis.

Recognizing the importance of small business to the California economy, Gov. Newsom at a press conference made a point of urging small businesses to reach out for these loans.

In addition, Gov. Newsom wrote a letter to congressional leaders urging the creation of a U.S. Treasury Authority to provide guaranteed loans to small businesses, directing cash assistance and zero interest loans to maintain small businesses along with rental assistance to help small businesses through a period of shutdown.

There is every reason government leaders seek support and encourage small businesses.

As the Wall Street Journal reported, “The crisis from the economic slowdown is most acute for the smallest businesses, which tend to operate on thinner profit margins and with smaller cash reserves. They employ about 60 million Americans, or nearly half the private workforce.”

The negative impacts when a small business closes ripple through the economy. Not only do the employees of the business lose jobs but the entire chain that allows the small business to function, from suppliers to lenders to adjacent businesses that benefit from the existence of one small business feel the effects.

Take a restaurant closing as an example. The backers of that restaurant from the bankers to the landlords of the property are deprived of payments and in turn that puts pressure on their financial obligations. Orders for food and beverages, linens and laundry, printing and advertising and so much more stop thus hurting the business organizations that supply those goods and services to the restaurant.

Most troubling is the consequences on the restaurant staff. Cooks and waiters and janitors lose their jobs and don’t have the money to pay rents or buy groceries.  Many other businesses count on the patronage of these workers and they also suffer when the restaurant closes.

When this situation happens on a massive scale as we are witnessing now because of the corona virus, the economy wavers and could collapse.

Gov. Newsom cited the situation in his letter to congressional leaders when he wrote, “the extreme curtailment of consumer spending resulting from public health directives to isolate at home is placing a disproportionate burden on small businesses.”

To save the foundation of the California and national economies — small business — consumers hold the key.

The economic rescue package that will be coming soon from Washington will include payments to individual taxpayers. After taking care of rent, food and medical needs, individuals should consider covering any additional needs by spending at their local small businesses.

The impact of spending at small businesses will assure staffers they can keep their jobs, send funds through the supply chain to associated businesses and bring the economy back to life.

Of course, we must hope that the COVID-19 crisis is checked soon so that government removes the shutdown order placed on many small businesses.

In California, under the governor’s directive of stay-in-place, only essential businesses can remain open. But in one sense, when you consider that the small businesses are the underpinning of a thriving economy that creates jobs and furnishes the means for government to collect taxes to operate, all small businesses are essential.

Help get them up and running by spending at small businesses as soon as you are able.

In that way, consumers will take their rightful place beside doctors and nurses, first responders, grocery store employees and others who are being recognized as heroes in these troubling times.

Originally published in Capitol Weekly 

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