The CARES Act Hits its $349B Funding Limit for Small Business. What’s Next?
It took just 13 days to deplete the entire segment of small business stimulus funding allocated in the CARES Act. $349 billion, gone in less than two weeks. For small businesses that either weren’t able to apply or that didn’t apply fast enough, there’s nothing left to apply for. These businesses — of which there are plenty of small manufacturers — are left without a lifeline as we enter the most pivotal time of the pandemic. Three months marks the time when most small businesses fold without consistent revenue.
Many manufacturers have the benefit of still being able to operate under the moniker of an essential business. But just because their doors are open doesn’t mean it’s business as usual. Manufacturing faces unique headwinds that leave small operations exposed to the pandemic. These manufacturers need stimulus. Will they get it?
The PPP runs dry as small businesses suffer
The most recent statistics from the United States Chamber of Commerce cite more than 30 million small businesses in the U.S. today. The Paycheck Protection Program (PPP) segment of the CARES Act established $349 billion to aid these businesses. Unfortunately, that equates to a hypothetical $11,633 for businesses in need — a figure far short of what even the smallest applicants of the program received. It’s not surprising that funds depleted in under two weeks.
With an average time of five days from application submission to approval and funding, businesses that didn’t apply in the first 48 hours were unlikely to see any funds. This meant getting past-year payroll information in order, filling out an SBA application, finding a qualified lender — all during a veritable overload of submissions. In retrospect, it was a longshot for many small businesses, including small manufacturing operations.
Unique manufacturing headwinds
Despite falling under the “essential business” category and maintaining generally normal operations, manufacturing firms face unique challenges amidst COVID-19.
Supply chains across the world continue to lag, leaving producers short of essential materials — or, forced to buy materials from different suppliers at higher costs. Compounding this issue is the inability to move finished goods in a normal capacity. According to the most recent ISM Report, production is down by a significant margin, along with new orders and exports. It all points to stagnating conditions for producers.
Tantamount to lack of orders and production is, of course, declining revenue and sporadic cash flow. These will cripple any business in any industry, but manufacturing is especially susceptible thanks to asset-heavy balance sheets and reliance on production volumes.
All small businesses face uncertainty during the COVID-19 pandemic, but few face the unique obstacles of manufacturing. If small manufacturers don’t get help soon, they could be closing their doors regardless of their status as essential businesses.
Is another round of stimulus coming?
In a stroke of good news for small manufacturers and other impoverished businesses, it’s likely we’ll see a second round of funding for the PPP in the near future. Bipartisan efforts are underway to re-fund the program and fervent talks continue on Capitol Hill. Until then, small manufacturers may be eligible for SBA Disaster Recovery Loans and state-based grants.
It’s unknown how much money might roll into the second act of the PPP, but legislators are privy to the need for expedience. Until they reach an agreement, small manufacturers need to do everything they can to keep their operations running lean.
