My take on the CARES Act

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Over the past month, many different areas of the US economy have come to an almost full stop. This as a result of the COVID-19 outbreak, and subsequent reaction of government officials ordering people to stay home. To keep people and businesses above water financially, the CARES act was passed, offering 2 TRILLION dollars of financial assistance to different areas of the economy. In my opinion, the most important part of this is the relief offered to small businesses. 

There are over 30 million small businesses in the US, comprising 99.9% of all the businesses here. What is considered a ‘small business’ in the eyes of the government is any company with fewer than 500 employees. These small businesses employ almost 60 million people, accounting for just under 50% of the American workforce. These numbers really put the statement “small businesses are the backbone of the US economy” into perspective. 

For these reasons, as previously mentioned, I think the most important part of the bill are the provisions for small businesses. The two main parts for small business being the Paycheck Protection Program, and the expanded Economic Injury Disaster Loan Program. One provides immediate relief, I mean like 3 days immediate, and the other to hopefully get through the next few months. Hopefully at that point we have resumed some sort of normal.  These parts of the bill are, as Secretary Mnuchin put it, a “license to keep people employed.” Keeping as many people employed as possible will help us come out the other side of this virus madness as strong as possible as a country and economy. Retaining your skilled workforce versus having to search, rehire and retrain a staff will help businesses bounce back faster when this mess passes.  

Essentially this means the government is offering a loan to be used for payroll and overhead expenses. If the money is used in these areas, most of the loan will be forgiven by the government… meaning you are being offered money you will not have to pay back. This money is intended to be a bridge to get through these difficult and uncertain times. If you were a viable business before the virus crisis, it is important to keep you in business, employees on staff, with the government offering to foot most of the bill so we can all get to the other side. The highly publicized direct payment to individuals and the boosted unemployment benefits to help keep people get by is great, but keeping businesses afloat and retaining their employees will have a much greater impact long term. 

Another interesting point that Secretary Mnuchin brought up when discussing the bill was that if it looked like the roughly 350 billion dollars in the bill for small businesses looked like it was not going to be enough, they would quickly look to add more funds as necessary. Mnuchin reassured that helping out these small businesses has had tremendous support on both sides of the aisle in Washington, so if more money was needed, it would be found. This is another reason the government is really hoping business owners will lean on the support offered during these times and keep moving forward with their staff employed. 

A separate angle not many people are talking about now, but could have notable long term effects on businesses is their reaction to the crisis. This is for businesses of all sizes. Management’s response to the situation at hand may impact decision making for consumers as well as potential future employees. Did they stick by their employees, looking for any avenue to get through the crisis together, or did they start cutting people for fear of the impact to the bottom line. As a consumer, are you taking note of different business reactions to what is unfolding in front of us? Will it have any impact on where you spend money? These are questions we will only be able to answer with time, but will be interesting to observe.