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This is The Anderson Files on PodClips.
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The Anderson Files is a look at commerce, investment, economics and retirement issues that affect each and every one of you.
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Your host is Mike Anderson, Executive Vice President, Retirement Services and partner of Finestone Partners.
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Finestone Partners is an independent firm with securities offered through Four Point Capital.
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And now your host, Mike Anderson.
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Today’s topic is what is America doing to help small business during the COVID-19 pandemic? To help explain.
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This is my guest representative Judy Chu.
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Judy Chu was elected to the US House of Representatives in July 2009.
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She represents the 27th congressional district, which includes Pasadena and the West San Gabriel Valley of southern California.
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In 2009, she became the first Chinese American woman elected to Congress in history.
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Representative Chu, welcome.
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Thank you.
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Thank you for having me.
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You’ve been on the Small Business Committee since you entered Congress and stayed on it even when promoted to exclusive committees like Ways and Means. Why your attachment to the Small Business Committee?
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First of all, the small businesses in my district are what makes this district so special. We have people from all kinds of different backgrounds, immigrants from around the world, and their first means of being successful, and American, being self-sustaining, is through small business.
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And in fact, my grandfather came here at the turn of the century and had difficulties making ends meet.
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But he decided to open up a small restaurant.
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He opened up a small Chinese restaurant and worked night and day and day and night using that very expensive labor, his sons, and he was able to make ends meet.
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So I know that my family has been able to survive because of small business.
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So I really believe in small businesses, the ability to give people a chance to be successful and to support their families.
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The more I worked in this committee, the more stories I heard from entrepreneurs and small business owners about the challenges that they faced.
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And so I felt like I could do something to help them and that I could ensure their success.
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So that is why I worked immediately on some projects.
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For instance, I worked immediately for the creation of two new small business development centers in my district.
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These small business development centers are called SBDCs for short, but they are the most successful program of the SBA because they provide hands-on experience on those seeking to start a small business or enlarge their businesses and they can provide a small business plan, marketing research,
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help with finding loans’
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and they can walk you through this whole process.
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But I was shocked when I started in Congress because we didn’t have any such thing in my district.
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So I made that my focus immediately.
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And as a result now I have two SBDCs in my district and they’ve been so successful.
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And by the way, let me say all the help from the SBCDs are for free.
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So you can’t, you can’t think of any better deal than that.
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Knowing that small business is such a huge part of American business,
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what you’ve done in your district, I can only imagine has been a model for other districts around the United States.
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I would hope so.
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And I do think that the reason the SBDCs are considered the best program of the SBA is because they do provide the hands-on experience to people no matter what their backgrounds.
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And you think about the vast differences in the kind of districts we have across the United States, the rural ones, the urban ones, the ones that are are very dense versus the ones like, say, in the middle of America, where you may have to travel miles in order to go to one.
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This is a kind of program that can help everybody no matter what the circumstance.
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So this is the kind of thing that unites us as Americans.
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The fact that people can open up their small businesses and achieve the American dream.
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What currently are your top priorities on the House Small Business Committee? Prior to the pandemic, it was to make sure that we could have access to capital for our small businesses.
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I really feel that is the major problem that small businesses have had in being successful.
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And so I was chair of the Access to Capital Committee and I made sure that we created programs or expanded programs that were successful that needed some help.
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That’s why I introduced the Creed Act to extend the SBAs 54 loan refinancing program for real estate.
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It allowed them to refinance old expensive commercial loans that were at lower interest rates.
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And when it was active for its trial year, it was wildly successful, where over 2700 businesses refinanced nearly $7 billion in old expensive debt when there was that trial year.
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So many businesses took part in it, but then the program was allowed to lapse.
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So I had a multi-year effort in which I tried to get this business loan to start up again.
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And I was finally successful.
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And in fact, it has been a very popular program, but I’m also doing other things on the loan issue.
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For instance, I am going to be introducing a bill to make permit the SBAs Community Advantage pilot program which offers capital to underserved businesses who may not be able to secure a traditional 7 A loan.
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This is very successful, but the fact that it isn’t permanent makes lenders less likely to implement this program in their financial institution.
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I’ve also authored legislation on another front which is for high-value startup businesses.
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This, this bill is the Investing and Main Street Act, and it allows investors and lenders to invest more capital into startup businesses that have great potential.
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So these are called the Small Business Investment Companies which combine this kind of capital from private sources.
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And, but the great thing is the moneys are guaranteed by the SBA.
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So that makes it so much more attractive. As a result,
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companies like Apple and Tesla got their start with SBIC, and that’s why I wanted to expand the SBIC by having a lifting of the cap on how much banks could contribute to the SBIC.
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There was a cap and it didn’t make any sense because that cap was implemented several decades ago.
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But clearly this is something people want to invest in.
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Well, I can say that I had success because it did pass out of the House and we’re awaiting now a vote in the Senate.
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So those are the kinds of things that we’ve had pre-pandemic.
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Post-pandemic though, is a whole other story because we have so many businesses that are just hanging on by a thread.
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And so my total focus right now is to make sure that they have the emergency loans that they need, such as the Payment Paycheck Protection program or PPP.
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It was something to make sure that small businesses could have funds temporarily.
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But what is so great is that if they fulfill the criteria, then they can receive forgiveness.
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So it turns into a grant. Do you believe that small businesses have been provided with adequate support to survive the crisis? I don’t, I think we still have to work on it.
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And in fact, just today, we had a bill to revise the conditions of PPT.
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I mean, we have to do this within a month.
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So this was a very quick program and we discovered so many things from our first implementation of PPP.
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Certainly, I’ve gotten so many phone calls from small businesses in my district on the difficulties that they had accessing PPP.
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So we have made some big changes.
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Now, let me say when PPP was first proposed, it was to have the financial institutions, including the big banks, give loans to these small businesses, but they were with restrictions.
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And that is that the loan would have to be used within eight weeks and that it would have to be used by June 30th.
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And that they would have to use 75% of their proceeds on payroll, and that the loan maturity would be two years, so they would only have two years to pay it back.
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Well, we had a lot of complaints from the businesses, besides the fact that there was a big problem at the very beginning in which the very large publicly traded corporations took advantage of this program and asked for millions of dollars of these loans, eating up all the proceeds very quickly.
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In fact, it ran out of funds in two weeks.
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But as it turned out that these were big corporations that had adequate access to funds elsewhere.
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So, a number of these big publicly traded corporations returned the money that freed up.
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Now, we have a freed up $150 billion for the smaller business, the truly small businesses and we had a set-aside, there was a $60 billion set-aside, for the truly small businesses to get their loans.
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The $60 billion set aside was for the CDFIs, the credit unions, the community banks, the micro lenders that really know who the underserved communities are, and by under served, I mean businesses owned by women, by veterans, and also, people of color.
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You’re listening to The Anderson Files.
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I’m your host, Mike Anderson with my guest, Representative Judy Chu. Representative Chu,
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what improvements would you make to the programs available for small businesses during this pandemic period, during COVID-19? So the bill today made many of the improvements that were needed to address the complaint that we heard from the various businesses. For example, the most poignant one to me was from the independent restaurants.
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They said, how can you expect us to extend the loans proceeds within eight weeks and then to do it before June 30th, this is even before we will have permission to open up a restaurant?
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And why would we keep our employers, employees during that time period when there was actually no work for them to do? They really needed flexibility on the PPP.
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What they said made total sense to me.
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So that is why we extended the deadline for extending the PPP loans and that deadline is now till December 31st, 2020.
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Also the amount of time to spend their loan proceeds has been extended tremendously, which is from eight weeks to 24 weeks, so they can do it at their own pace.
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The other one decision that was very important was to extend the loan maturity.
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So rather than a short two years, now it’s been extended to five years.
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The other change was to lessen the requirement that businesses spend all their money on payroll.
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It was 75/25 but it’s been changed to 60/40.
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And the reason for this is we know certain businesses really spend more money on their on, on their mortgages or rent or on fixed cost.
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So we needed a little bit of flexibility there.
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So that we can make it more balanced for all the kind of small businesses that are out there.
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Do you support changes to the PPP that will make it easier for small businesses to spend the funds and, and receive forgiveness? Well, I believe that these changes will make it much easier for them.
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I know the goal is to have that for business, and I believe that if they are able to spend 60% of their proceeds on payroll and 40% on fixed costs, that that is something I think that they can live with.
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I think the flexibility was a big issue because we now know that our country is opening up, but really opening up on a gradual basis.
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So if you open up your restaurant and you can only have 25% of the people in there, then you are going to have to have to extend the time in which you can use this loan.
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You’re gonna have to rely on this loan for some time to be able to make up the amount of money that you need in order to keep the doors open.
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So I believe that they can do it with these changes, that it is something that they can definitely accomplish. With small employers and so many protocols during this COVID-19 period that they’re being asked to follow, not only from a financial standpoint, but from bringing employees back, operating, being safe on site at a place of business.
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Do you see some safe harbors being put in place for employers who may be doing their best to comply? That may not be exactly to the letter.
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Do you see some safe harbors being extended to small business? Well, we will have to see, as we get into the forgiveness process, because remember we haven’t even started.
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So, I suspect that there will be adjustment.
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I really do suspect it.
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And we will just have to see as it comes.
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We have at least a month to go before we even start the loan forgiveness procedure.
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Well, actually it won’t even be a month now that we have actually passed a bill today to extend it to December 31st.
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So my guess is, yeah, there’ll be some changes.
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But also I do have, I do want to say something about these other things that can help small businesses. For instance, the employee retention tax credit and that is a temporary 50% payroll tax credit to encourage businesses to keep their employees on the payroll.
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So that if a small business was not able to qualify or receive PPP funds, there’s also a tax credit to help offset those wages.
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And also a refundable, a new 50% payroll tax credit for their fixed costs.
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And that is for commercial rent or mortgage payments or utility payments.
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The refundable aspect of it is a major thing because if there’s still credit left over after the credit that been applied to an employer payroll tax liability, the employer will receive a refund.
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And let me also make sure that everybody knows that we have the Economic Injury Disaster loans and grants.
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And remember with the grant, you get $10,000 that you do not have to pay back, it is $10 10,000 dollars for you to deal with whatever you need.
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In order to keep your business alive and for the loans, it’s at a low interest rate and can also help in keeping your business alive.
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Are there additional things that Congress will be doing to help small business get back and up and running once it’s safe to actually do so? Well,
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I think that there inevitably will be more programs that we have to have.
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The first thing is making sure that we have a system in place for people to feel safe because you can in fact say, oh, you, the restaurant can open up your doors for 100% of the people that you had before.
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But people will not come unless you have a good testing and tracing program, unless you have vaccine development.
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But certainly at the beginning, what we really and truly need is an effective testing and tracing program so that people have confidence that if they get into that small business that they will be safe, but also as businesses ramp up their operations, they will need help.
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And that is by having our traditional lending programs be more available.
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I think we will need to drastically increase the amount of capital available to small businesses in the SBAs traditional lending program such as the 7 A program and the 504 program, these kind of low interest government-backed loans can help to get capital off the door fast.
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And programs like the 504 lending program will help businesses that need to purchase new real estate or major pieces of equipment.
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So it is the SBA that can be invaluable in this process.
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We do not want to see our small businesses fail through no fault of their own.
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So I think it’s up to us to make sure that they have every resource available. With the few minutes that we have left,
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what’s Congress doing to stop the spread of COVID-19? Well, it is testing, testing, testing.
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It is testing that it’s the number one thing to do to contain the virus.
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And that is to ensure that everyone who needs a test can get one, that way we can isolate new outbreaks and contain the spread until we have a vaccine.
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Now, I am very fortunate because I live in Los Angeles County and we have universal testing.
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Anybody can go get a test.
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You don’t even need a symptom.
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Now.
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So, we, we are realizing our dream here.
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But in the rest of the country, this is not the case.
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So we have to make this universal and, in order to make it universal, we have to ensure that our localities across this nation have the supplies for testing and the infrastructure for contact tracing.
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So that is why Congress authorized $25 billion in funding in the last bill.
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So it’s already been voted on and is available, to develop this.
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So, why do I say supplies for testing? Because, in the United States, we have individual kinds of tests and each type of test has its own reagents or chemicals that are needed to make that test successful.
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We have one out of those reagents at various times and so we need to make sure those supplies are there for that.
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The contact tracing is a big deal and it is actually a big program because you’re going to need armies of people that will go out and question those that an infected person has come in contact with and then make sure that they quarantine.
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And these contact tracers will have to be people that are familiar friendly people to those in the community because you can’t just go around and have, you know, people from the National Guard knocking on your door doing that.
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You know, that would certainly frighten a lot of people in certain communities. We also need to make sure that our health care providers who are administering these kinds of testing procedures and, and certainly are getting our people to, to become healthy again that they need help because they’re on the front lines fighting this virus every day.
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So we have authorized $175 billion in funding directly to them to make sure that they have the resources that they need, and especially to make sure that they have the personal protective equipment that they need so that these employees can remain healthy.
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And it is so important to make sure that everybody can be tested for free.
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We did in fact do that in our first bill, but actually, I think that we have to go one step further.
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This one step further was contained in our Heros Act, which passed out of the House, but is not passed by the Senate yet.
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And that is if you test positive, then I think treatment needs to be available to everybody in this country so that they can recover from COVID-19 right now.
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It is not available to everybody because we have large numbers of uninsured people in this country still.
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So we need to make sure that it is indeed available, because after all, the only way we’re going to recover from COVID-19 is if everybody can get help from health care providers and recover from this. Representative Chu, thank you so much for the time today, sharing all that you have regarding small business and the state of where we are in dealing with COVID-19 in the United States.
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Your service is so appreciated, in your district and across LA and the country.
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We hope to have you back with some updates.
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You’re more than welcome to come back and thank you so much.
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Thank you so much, Mike and thank you to the Small Business Council.
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And thank you for letting me share with you some of the things we’re doing in Congress for small business.
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We wish you the best and for myself and the Small Business Council of America.
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We all wish you the best.
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I’d like to thank Darryl Wayne at the controls today, Mark Alyn, our producer, I’m Mike Anderson, your host and this is The Anderson Files.
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Keep calm and keep listening.
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You’ve been listening to The Anderson Files with Mike Anderson, visit us at PodClips.io and check on the Financial box for more information on The Anderson Files.