Even though the federal Small Business Association is providing small business loans totaling more than $1 billion to 5,200 small businesses in West Virginia, it will still take time to recover economically from the pandemic, a West Virginia University professor said.
“But, the question is how long will it take for the money to get to the businesses?” said Heather Stephens, assistant professor of resource economics and management in the Davis College of Agriculture, Natural Resources and Design. “And as of April 15, the fund was out of money. So, how many businesses who need money didn’t get it?”
The SBA loans are part of the $2 trillion bailout passed by Congress last month to financially aid businesses that have been hit hard by the pandemic.
These specific loans come from the SBA’s Paycheck Protection Program and are designed to incentivize small businesses to keep employees on the payroll. The average PPP loan size is $239,152, the SBA said.
SBA will forgive the loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
But the program has run out of money and lawmakers are now scrambling to try to get an additional $250 billion extension. Both parties are in a stalemate because Democrats want additional funding for hospitals, as well as state and local governments.
Still, Sen. Shelley Moore Capito, R., told The Dominion Post Thursday she is optimistic PPP will be extended.
“It keeps the employee and employer connected,” she said.
“We’ll work it out.”
“No one believes that Congress is finished legislating in response to our current emergency.”
In a statement, Sen. Joe Manchin, D., said Tuesday there are commonsense bi-partisan fixes that can improve the program.
“For example, several of my Republican colleagues and I agree on a simple change that would allow government-owned hospitals like the one in Webster County to apply for these loans. If we don’t include commonsense fixes like this in the next bill, it doesn’t matter how much money we put into this program. It won’t get to the people and the places that need it most.”
For West Virginia, that can be critical especially since almost 20% of the population is 65 or older, according to the U.S. Census. That statistic, coupled with the fact much of the state’s economy is reliant on jobs in the tourism and energy sectors, could prove problematic, especially since people are staying at home.
“While no one knows for sure exactly when we will get back to a ‘new normal,’ it is likely some of our small businesses will not survive,” Stephens said. “And, it will take some time for energy prices to recover, which will affect energy jobs. We already know that unemployment claims are way up.”
Boosting local businesses
The Morgantown Area Partnership launched a new Gift Card Stimulus Program to help local restaurants weather the pandemic.
For every $25 card purchased through the website map-wv.org/gift-card-stimulus, The Partnership will kick in an additional $10, making the gift card worth $35.
“The Partnership staff came up with the idea immediately following our stay-at-home directive,” Partnership President and CEO Russ Rogerson said. “We researched other programs that are being offered around the country by chambers of commerce and modeled our program after the others. It had to be fast, meaningful and fairly easy to implement given the travel and other restrictions we are all operating under at this time. I’m proud of the Partnership team for their work on this program.”
As of Thursday, 35 gift cards had been sold. Restaurants participating in the program include Almost Heaven Bar & Grill, Buffalo Wild Wings, Get Fit Juices & Shakes, Lotsa Stone Fired Pizza, Qdoba Mexican Eats, Shoney’s and Taziki’s Mediterranean Café.
Rogerson also said the Partnership is looking at ways to include other businesses in the gift card program.
“As are most organizations at this time, we are operating out of the box on this idea and others,” he said. “So we wanted to do the restaurant gift card program first to see how it works and if it adds value to our membership and the community.”
Separately, WVU’s John Chambers College of Business and Economics is partnering with Encova Center for Entrepreneurship and Innovation — part of the business school — to help small businesses by offering free — and remote — services such as assistance with loan applications, marketing, business planning and finances.
“We have solicited the efforts of the Chambers College faculty who are subject matter experts and can assist these small businesses,” Anna Carrier, community business program lead of the Encova Center, said.
Post COVID-19 economy
Stephens said the state has an industry structure that makes it vulnerable, especially because of its reliance on tourism and energy.
Oil and gas are weak because of low prices and the fact no one is traveling and everything is closed.
“Basic economics tells us when supply is going up and demand is going down, prices are plummeting,” she said. “And we’re likely to see some of the players in these industries go bankrupt. If nothing else, they’re going to start laying people off. Those are higher-paying jobs that at least in the short run are going to go away.”
Even after the pandemic restrictions are eased or lifted, Stephens said she is doubtful people will immediately start traveling. Instead, they will feel more comfortable talking to their neighbors.
“They probably won’t go into crowded places with lots of people,” she said. “I think it’s going to take a long time for that level of comfort to come back.”
Despite financial aid from the government, there are going to be some small businesses that will fail. Plus, the pandemic could lead into a fundamental shift in how the economy works, Stephens said.
To compete, the state needs to invest in broadband, both wireless and wired and in education, especially at the
K-12 level. West Virginia currently ranks 45th nationally in this category, she said.
“These investments have been needed for some time, but the crisis has exposed how critical they are. Broadband will not only facilitate work-from-home, it will promote better telemedicine and remote education and will provide support for the state’s small businesses.”
In the interim, Stephens said it’s important to continue to follow the COVID-19 safeguards.
Capito said it is also important to be vigilant about testing for the virus as well, even if some restrictions are lifted.
“Testing has to be pervasive,” Capito said. “That will give us assurances we’re not going to backslide.”