What Biden’s COVID Plan Means for Small Biz

January 21, 2021

Last week, President Joe Biden outlined a proposal to tackle the key issues facing the U.S., a legislative package dubbed the “American Rescue Plan.” Included in the package is a national vaccination program and safe reopening of schools; provide another stimulus payment of $1,400 per person; and relief for small businesses and workers.

Specifically, the American Rescue Plan includes:

Emergency Paid Leave – All employers—even those with fewer than 50 employees—would be required to provide up to 14 weeks of paid sick and family and medical leave to employees for reasons related to COVID-19. The maximum paid leave would be $1,400 per-week for eligible workers, and employers with fewer than 500 employees would be reimbursed. The paid leave provision would be extended through Sept. 30, 2021.

Things to consider:

  • How will small employers be reimbursed, and will the mechanism be relatively easy to use? Such a mechanism must be straightforward and easy to navigate for already stretched-thin small-business owners.
  • What is the timeframe for an employer to be reimbursed? Small businesses are facing nearly a year of declining customer demand and have exhausted many of their resources—reimbursement needs to happen quickly.

Back Hazard Pay – Biden is calling on employers to provide essential workers with back hazard pay for the risks they took across 2020 and up to today.

Things to consider:

  • Are any businesses exempted from this requirement, either by size or industry? While many large businesses have, indeed, prospered the last several months, that is hardly the case for smaller businesses. What makes small business so unique is that we hire friends, neighbors and family, oftentimes, and there is a personal drive by these employers who genuinely want to take care of their employees. A mandate could complicate that relationship and ultimately result in less benefit to workers.
  • What constitutes hazard pay? Any requirement should be clearly laid-out and explained to protect against inadvertent mistakes.

Small Business Grants – President Biden is proposing grants to more than 1 million of the hardest hit small businesses totaling $15 billion.

Things to consider:

  • Providing grants to hard-hit small businesses can be a very effective way to help them survive the pandemic, but the process must be fair and it must be easy to navigate. While the PPP has provided a great deal of relief for small businesses, there was, and continues to exist, a great deal of confusion—if people can’t figure out how to apply, the grants won’t do much good.

Small Business Lending & Investment – The American Rescue Plan would leverage $35 billion in government funds into $175 billion in additional small business lending and investment.

Things to consider:

  • The U.S. Small Business Administration has an outstanding track record of leveraging appropriated money into broadly available loans through various programs, namely the 7(a) loan guarantee. Utilizing existing mechanisms and ensuring low use-fees will make the process easier and more attractive for both the borrowers and lenders—a critical component of any leveraged lending program.

Raise the Minimum Wage – The American Rescue Plan recommends raising the federal minimum wage to $15 per hour.

Things to consider:

  • Will the increase be phased-in? A significant hike in minimum wage could be very difficult for many small businesses—particularly those in low profit margin businesses, doing so right now could force them out of business altogether. Any increase should be gradually phased in to ensure that workers receive increases in wages while ensuring businesses can stay in operation.
  • Will any industries be exempted? Many of the industries hardest hit by the pandemic are also those which often pay minimum wage. A significant increase in wages for these businesses would simply not be sustainable in today’s climate.