Pandemic Relief Fund For Small Business – June 11, 2020 (Brunswick, ME) – Small businesses are the backbone of Maine’s economy. In 2019, businesses defined as “small” by the U.S. Small Business Administration (SBA) (fewer than 500 employees) accounted for 99% of all businesses in Maine and employed more than half of the workforce of the State[i]. When the COVID-19 pandemic forced many small businesses to close in response to health concerns and government directives, the impact was felt immediately.
As Maine’s largest CDFI, Coastal Enterprises, Inc. (CEI) spent the night resolving pressing issues faced by our business consulting and credit clients.
Pandemic Relief Fund For Small Business
In the days following the first case of COVID-19 in Maine, CEI developed an online library with information on best practices and state and federal resources for small businesses. We’ve also launched a series of webinars to guide existing and new customers through the maze of federal, state, and local laws and assistance programs.
Our Response To Covid 19
In the first two months of the pandemic, CEI business advisors held more than 2,000 one-on-one sessions with small business owners, nearly double the number they would have in a normal year. CEI’s lending team has worked closely with borrowers to modify over 50% of the loans in our portfolio.
Immediate loan relief was provided through a federally funded SBA small loan program, representing 72 loans in CEI’s portfolio. However, CEI staff soon realized that the program did not meet the needs of many other borrowers. They had to raise funds to fill the gaps in these companies.
Small farms are an important part of Maine’s local food system in our rural state, but when they were introduced, farms were ineligible for many federal COVID relief programs. A grant of $100,000 from the Henry P. Kendall Foundation enabled CEI to provide three months of debt relief with payment of principal and interest for all farms in our portfolio.
The subsidies eased the initial financial burden and gave farmers the flexibility they needed to move from models that relied primarily on selling to restaurants and establishments (many of which were currently closed) to a more direct-to-consumer model that was suddenly observed. give increase in demand. With limited orders from longtime restaurant and foodservice customers, Flying Goat Farm in New Gloucester, Maine, is piloting a milk and door-to-door delivery service and partnering with other local farms to provide other basic products such as bread, eggs and soap. They are also exploring the possibilities of establishing a small farm in the area. According to the owners of Flying Goats, Devin Shepard and Cara Sammons-Shepard, “Being able to withdraw the funds from this loan (IEC) in a short period of time will accelerate the schedule and potentially allow our farm to return to cash sooner. . “
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Another group of business owners who do not have access to federal assistance are CEI payday loan borrowers, all of whom immigrated to Maine from countries other than the United States. These business owners are prohibited by their religious traditions from paying interest. CEI solves this problem by offering a paid Sharia-compliant product. To match what is offered to SBA microloan borrowers, CEI has raised funds from local banks, businesses and non-profit organizations to cover six months of principal and interest payments for borrowers from microcredits.
Recently, in response to customer feedback that existing assistance programs do not cover essential business expenses such as rent, insurance and/or unpaid bills for supplies, CEI developed the Wicked Reboot Loan for working capital requirements or operating expenses. This three-year, 3% loan of up to $30,000 is designed to work in conjunction with federal relief programs and is available to businesses whether they have received PPP or EIDL financing. SBA covers the first six months of principal and interest payments.
Because CEI works so closely with thousands of entrepreneurs in our community, we know their specific needs and challenges. This allows CEI to tailor supports, such as farms and payday borrowers, unemployment webinars designed specifically for child care providers, and several individual entrepreneurs who receive one-on-one, one-on-one coaching. This mission-driven local knowledge is why CDFIs play such an important role in helping entrepreneurs start and grow businesses in underserved areas. As small businesses grapple with the economic impact of COVID-19, CDFIs like CEI are on the front lines and dedicated to rebuilding local economies. The COVID-19 pandemic has had a profound impact on the small business sector. A previous report by the JPMC Institute provided estimates of the impact in the first weeks after the declaration of a national emergency on March 13, 2020, and many states issued stay-at-home orders that restricted many companies (Farrell, Gandum and Mack 2020a). Businesses adjusted their operations not only in light of these restrictions, but also as consumers reduced spending (Farrell, Greig et al. 2020a) and moved some of it online (Farrell, Wheat et al. 2020) . Some businesses have been temporarily closed (Bartik, et al. 2020). As cash balances rebounded, buoyed by pandemic-related aid packages, May profits remained significantly lower than a year ago.
This report focuses on small businesses impacted by COVID-19 and the ensuing economic downturn, with a focus on industries in which Black and Hispanic businesses are overrepresented (personal services, repair and maintenance, and construction) , as well as which industries suffered the most damage. Previous research has found that the restaurant, retail, and personal service industries have been hardest hit by the outbreak of COVID-19 (Farrell, Wheat, and Mack 2020a). The financial impact in the sector and in these industries in particular can be especially significant for Black and Hispanic businesses. These businesses are more financially vulnerable, with lower revenues and cash flow than white-collar businesses (Farrell, Wheat, and Mack 2020b). Therefore, they may be more vulnerable to negative shocks, especially if they also operate in hard-hit sectors.
Which Small Businesses Are Most Vulnerable To Covid 19 And When
We look at the evolution of small business cash balances, income and expenses through May 2020 using an unspecified sample of approximately 1.3 million small businesses nationwide. This example is based on anonymous savings account transactions
And represents both self-employed and employer-owned companies, mainly in urban areas. Absolute majority – over 80% of small businesses are not employers
, which is reflected in our example. In addition, we used an unspecified sample of small businesses matched to owner race information available from voter registration records. (See Farrell, Greig, et al. (2020b) for details on the matching algorithm.) Among states where racial/ethnic data is collected in voter registration records, Chase had a footprint in three in 2018: Florida, Georgia and Louisiana. . For this subset of 92,000 small businesses in these three states, we can provide information on the differential impact of COVID-19 on white, black, and Hispanic small businesses.
Together, the cash balance, income, and expenses provide a summary of a small business’s financial health. Balances need cash from companies, especially when they have a negative impact. Cash flow – income and expenses – shows the amount of business activity that can be reflected in the cash balance. However, the cash balance is not just the result of the net change in income and expenses: business owners can also transfer personal assets or obtain other financing to bolster their balance sheet. Our cash flow accounting does not include these types of financial transfers.
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We looked at these measures of the financial health of all companies in our sample through May 2020, focusing on sectors where Black and Hispanic companies are overrepresented and sectors that have been particularly hard hit by COVID-19. . In particular, we found:
And provide additional information. In particular, we provide estimates of the impact of the pandemic on the financial performance of small businesses. It’s no surprise that small businesses are struggling, but this data quantifies and varies the impact and informs policy makers about which industries and demographics are most deeply impacted. For these small businesses, recovery can be even more difficult than that.
First finding: Cash balances at white-owned restaurants doubled in May, compared to a 38% increase for black-owned restaurants.
In the current economic downturn, many policymakers worry that black and Hispanic businesses are vulnerable, especially as they are overrepresented in some of the hardest-hit industries. Differences by race of industry owners can be seen in their cash balances compared to the same time last year. Despite lower revenue levels among Black and Hispanic firms in the same industry (Farrell, Wheat, and Mack 2020b), we do not find that changes in median earnings varied significantly by race of owners within the same industry at during this period. That is, the differential changes in earnings by race of ownership during this recession result from differences in the distribution of industry by race of ownership.
Cei’s Mission Driven Advice And Financing Helps Small Businesses Manage Through The Covid Pandemic
A collection of illegal cash flows among small businesses in general (Farrell, Wheat, and Mack 2018), a relatively small within-industry sample of businesses with information on the race of owners, and a short period to the end of May 2020 can mask trends that may be present in a larger sample or more visible over a longer period of time. In conclusions 1
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