Monday, March 30, 2020
The legislation, the largest stimulus package ever enacted by the U.S. government, will inject around $2 trillion into the economy by, among other things, extending unemployment benefits to contract workers and offering hundreds of billions of dollars in low-cost loans and grants to small businesses.
Many MLSs on the street today are independent contractors (1099 workers), and as such don’t qualify for state unemployment benefits. The Pandemic Unemployment Assistance (PUA) Act, which was included in the CARES Act, extends those benefits to 1099 workers impacted by coronavirus for up to 39 weeks, with the federal government reimbursing the states for the amounts disbursed, plus administrative costs.
The federal government also will provide up to $600 a week in supplemental benefits for unemployed workers for up to four months, through July 31, 2020, and up to 13 weeks of federal benefits to those who remain unemployed after state benefits run out. (State laws vary, but most provide for a maximum of 26 weeks unemployment.)
Benefits will be based on previous income and will vary according to state guidelines, but the new legislation could provide a lifeline for many agents. "This will especially help those agents that don’t have large residual portfolios and depend primarily on new sales for income to support themselves and their families," said James Shepherd, founder of CCSales Pro.
The legislation also earmarks $349 billion in low-interest, forgivable loans to small businesses – including ISOs and merchants that are impacted by the coronavirus and can’t otherwise obtain funding for payroll and ongoing operations. The loans are federally guaranteed up to $10 million for up to eight weeks of payroll and other expenses (including debt reduction). The loans are available to any business with fewer than 500 employees, including sole proprietors and independent contractors.
Much of the paperwork traditionally associated with government loans is eliminated under the program – a business merely needs to provide "good faith certification" that it has been affected by the coronavirus pandemic. And while interest will be assessed, at 4 percent, principal amounts will be forgiven for borrowers that can show the money was spent to cover payroll and other costs of keeping the borrower’s business running during the pandemic.
The package also includes emergency grants of up to $10,000 per business from a $10 billion fund, and $17 billion in relief to Small Business Administration loan holders to cover up to six months of loan payments. Plus it encourages banks to lend directly to small businesses with backing from the SBA.
In several television appearances on Sun., March 29, Treasury Secretary Steve Mnuchin said the small business loan program should be up and running this week.
“Many medium and large ISOs that are faced with huge shortfalls in revenue may leverage this stimulus bill to get the revenue they need to continue operations,” Shepherd said. “While capital is generally available in our industry, that capital is often expensive and short term, so the prospect of a business loan at rates in the range of 4% or less, along with a term of five to 10 years, may entice ISOs to leverage these resources.”
The coronavirus pandemic has wreaked havoc on the economy, especially small businesses and the restaurant sector. The National Restaurant Association is forecasting $225 billion in losses to restaurants and others in the food service industry over the next three months, as well as 5 to 7 million job losses.
CardFlight published a report on March 26 that offers a glimpse of the impact across business sectors. Total dollar sales at small businesses using the firm’s SwipeSimple software to accept payments was down 16.4 percent for the week ending March 22, after falling 4.3 percent the week prior. Bars and restaurants were the hardest hit, but retail and services businesses were hard hit, too. Cardflight reports retail merchant saw a nearly 12 percent drop in business; at services firms, business was down 17.4 percent.
According to data released on March 23 by the National Federation of Independent Businesses, 76 percent of small businesses report being negatively impacted by the coronavirus outbreak, up from fewer than a quarter of small businesses in February.
One in five small businesses said they are not currently affected by the coronavirus pandemic, but 77 percent of that group anticipate their situation changing if the outbreak spreads more broadly in their immediate areas over the next three months. Of the respondent businesses negatively impacted, 23 percent reported experiencing supply chain disruptions, 54 percent reported slower sales, and 9 percent reported being affected by sick employees (although not necessarily employees who have test positive for coronavirus).
“Many owners have already sought out financial help and more are planning to do so in the near future. The outbreak will leave few, if any, owners unscathed,” NFIB said in a press release on its findings.
Shepherd is hosting a live, virtual event on Fri., April 3, beginning at 3 p.m. Eastern, during which he and several experts, including Patti Murphy, The Green Sheet senior editor and co-host of the Merchant Sales Podcast. The event will take a deep dive into the CARES Act and what it means for ISOs, MLSs and their small business clients.
Participation is limited to 500, and Shepherd said he expects a full house. So register early. Here’s a link to the registration page: register.gotowebinar.com/register/9188714736676927243?fbclid=IwAR2PeJjW5mq_I_C5wHw9WaaIUX39CI-sP7miWZ7JirVtDvRTjt4Aaj7OOy4
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