Tag Archives: small business

Small Business owners struggle to pay rent

Revelations 18:23 ‘For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • Survey: A third of U.S. small businesses can’t pay rent because of inflation
  • 35% of U.S. small business owners “could not pay their rent in full or on time in June.”
  • “Most small business owners attribute this worsening situation to record-breaking inflation, which includes escalating gas, labor, and supply costs,” Alignable said. “Simply put, there’s less money available to pay the rent.”
  • According to the survey, rent increased for 48% of small businesses this month. Meanwhile, rent delinquencies have continued to increase all year.
  • A different survey found that 51 percent of all small businesses owners in the U.S. believe that rising prices could “force them to close their businesses within the next six months.”

Read the original article by clicking here.

Treasury’s Mnuchin open to blanket forgiveness for smaller business relief loans

WASHINGTON (Reuters) – U.S. Treasury Secretary Steven Mnuchin said Friday policymakers should consider blanket forgiveness for all smaller businesses that received “Paycheck Protection Program” loans.

Mnuchin told lawmakers that they should consider such an approach to reduce complexity, coupled with some form of fraud protection.

He also said the Trump administration supports adding more funds to the $660 billion program, as well as allowing especially hard-hit businesses to apply for a second emergency loan.

He did not define how small a loan would have to be to qualify for automatic forgiveness, and added it should be paired with some form of fraud protection without going into detail. Several business and banking groups have pushed for blanket forgiveness for all loans under $150,000, arguing the requirements for applying for forgiveness under the program are too complex.

His comments come as Congress is preparing further economic relief legislation to support businesses and people harmed by pandemic lockdowns. Roughly $100 billion remains in the PPP, a forgivable loan program created by the initial stimulus package, is set to expire on Aug. 8.

Mnuchin added that he would also support applying some sort of “revenue test” to future PPP loans to make sure the remaining funds go to businesses that need it the most. The PPP has come under criticism after wealthy and larger companies secured loans under the program, which was billed as relief for small businesses.

“This time, we need to have a revenue test and make sure that money is going to businesses that have significant revenue declines,” he said.

He also said he would support efforts to set aside a portion of remaining PPP funds for minority-owned businesses, amid concerns from some lawmakers that those businesses were struggling to secure funding.

(Reporting by Pete Schroeder; Editing by Nick Zieminski)

What you need to know about the coronavirus right now 6-12-20

(Reuters) – Here’s what you need to know about the coronavirus right now:

Second-wave fears

Governors of U.S. states that are COVID-19 hotspots pressed ahead with economic reopenings that have raised fears of a second wave of infections.

The moves by states such as Florida and Arizona came as Treasury Secretary Steven Mnuchin said the United States could not afford to let the novel coronavirus shut its economy again and global stocks tanked on worries of a pandemic resurgence.

In Europe, health experts said the risk of a second wave of COVID-19 infections big enough to require lockdowns to be reimposed is moderate to high.

India reported a record daily increase of cases and became the world’s fourth worst-hit country, raising the prospect of the return of a lockdown just days after it was lifted.

Insurers beat back virus claims

U.S. property and casualty insurers have cast the coronavirus pandemic as an unprecedented event whose cost to small businesses they are neither able nor required to cover.

The industry has warned it could cost them $255 billion to $431 billion a month if they are required, as some states are proposing, to compensate firms for income lost and expenses owed due to virus-led shutdowns, an amount it says would make insurers insolvent.

A Reuters examination of the estimate, however, suggests the possible bill may not be so onerous.

British economy battered

The UK economy shrank by a quarter in the March-April period as entire sectors were shuttered by the coronavirus lockdown.

“This is catastrophic, literally on a scale never seen before in history,” Paul Johnson, director of the Institute for Fiscal Studies think tank, said. “The real issue is what happens next.”

The Organisation for Economic Co-operation and Development says Britain – with its huge services industries that are hit hard by social distancing measures – could suffer the worst downturn among the countries it covers, with an 11.5% contraction this year.

Bottlenecks? Glass vial makers prepare for vaccine

Drugmakers are warning of a potential shortage of vials to bottle future COVID-19 vaccines, but their rush to secure supplies risks making matters worse.

Schott AG, the world’s largest maker of speciality glass for vaccine vials, says it has turned down requests to reserve output from major pharmaceutical firms because it does not want to commit resources before it is clear which vaccines will work.

“We have to keep the door open to give capacity to those who really are successful in the end. We don’t want to be portrayed in the press as the ones who were unable to package the best vaccine,” Chief Executive Frank Heinricht told Reuters.

Roping in the drones

Airspace Systems, a California startup company that makes drones that can hunt down and capture other drones, on Thursday released new software for monitoring social distancing and protective face-mask wearing from the air.

The software analyzes video streams captured by drones and can identify when people are wearing masks, standing close together or points where people gather in clusters. Airspace aims to sells the system to cities and police departments.

The company says the system does not use facial recognition and does not save images of people or pass those images to its customers. Even with those protections in place, the system is still “a step toward robots that are monitoring our behavior,” said Jay Stanley, a senior policy analyst with the American Civil Liberties Union’s Speech, Privacy and Technology Project.

(Compiled by Linda Noakes, Editing by Timothy Heritage)

What did eight weeks and $3 trillion buy the U.S. in the fight against coronavirus?

By Howard Schneider

WASHINGTON (Reuters) – Unemployment checks are flowing, $490 billion has been shipped to small businesses, and the U.S. Federal Reserve has put about $2.5 trillion and counting behind domestic and global markets.

Fears of overwhelmed hospitals and millions of U.S. deaths from the new coronavirus have diminished, if not disappeared.

Yet two months into the United States’ fight against the most severe pandemic to arise in the age of globalization, neither the health nor the economic war has been won. Many analysts fear the country has at best fought back worst-case outcomes.

For every community where case loads are declining, other hotspots arise and fester; for states like Wisconsin where bars are open and crowded, there are others such as Maryland that remain under strict limits.

There is no universal, uniform testing plan to reveal what is happening to public health in any of those communities.

Between 1,000 and 2,000 people a day continue to die from the COVID-19 disease in the United States, and between 20,000 and 25,000 are identified as infected.

If there is consensus on any point, it is that the struggle toward normal social and economic life will take much more time, effort and money than at first thought. The risks of a years-long economic Depression have risen; fact-driven officials have become increasingly sober in their outlook, and the coming weeks and coming set of choices have emerged as critical to the future.

Faced with two distinct paths – a cavalier acceptance of the mass deaths that would be needed for “herd immunity” or the truly strict lockdown needed to extinguish the virus – “we are not on either route,” Harvard University economist James Stock, among the first to model the health and economic tradeoffs the country faces, said last week.

That means no clear end in sight to the economic and health pain.

“I am really concerned we are just going to hang out. We will have reopened across the board, not in a smart way … and we will have months and months of 15% or 20% unemployment,” Stock said. “It is hard to state how damaging that will be.”

TAKING STOCK

Treasury Secretary Steven Mnuchin and Fed chair Jerome Powell will appear via a remote internet feed before the Senate Banking Committee on Tuesday to provide the first quarterly update on the implementation of the CARES Act, which along with a follow-up bill formed the signature $2.9 trillion legislative response to the pandemic. (See a graphic  of the full stimulus.)

They will likely face detailed questions about their efforts after a rocky few months. The Paycheck Protection Program, in particular, was originally overwhelmed with applicants and criticized for hundreds of loans doled out to publicly traded companies.

Yet, now two months in, a replenished program still has $120 billion in funding available – money on the table that analysts at TD Securities suggest people have refused to pick up because of confusion about the terms.

The hearing is also likely to be a platform for Democrats to coax Mnuchin and Powell toward acknowledging that more must be done – Powell said so directly in an appearance last week – and for Republicans arguing against quick new action.

DEATH PROJECTIONS DOWN, TESTING UP

The lockdowns and money have had an impact on the disease’s spread, as the postponement of sporting events and other mass gatherings, and restaurant and store closings curbed the spread of a virus that some early estimates saw killing as many as 2 million Americans.

Deaths as of Saturday stood at around 87,000 and are expected to pass 135,000 by early August. (Graphic )

After federal government missteps and delays, testing has ramped up to 1.5 to 2 million tests a day, still less than half what health experts say the country needs. (Graphic )

Strict lockdowns slowed the rate of infection in the hardest-hit areas, “flattening the curve” so hospitals could retrain nurses, cobble together donations of personal protective equipment such masks, gloves and gowns, and were spared from the direst predictions about intensive care shortages.

However, the fight against the coronavirus may still be in its initial stages in more than a dozen U.S. states, where case numbers continue to rise. (Graphic )

And community agencies are noting increases in cases of domestic violence and suicide attempts after weeks of home confinement.

TRILLIONS MORE SPENDING AHEAD?

At its passage in late March the CARES Act was regarded as a major and perhaps sufficient prop to get the U.S. economy through a dilemma.

Fighting the spread of the virus came with a massive economic hit as stores closed, transportation networks scaled back, and tens of millions of people lost jobs or revenue at their businesses. (See a graphic of the economic fallout.)

Facing a decline not seen since the Great Depression of the 1930s, the main goal of the bill was to replace that lost income with checks to individuals and loans to small businesses that are designed to be forgiven.

JPMorgan economist Michael Feroli estimated recently that the loans and transfer payments under the act turned what would have been an annualized blow to income of nearly 60% from April through June into an annualized decline of 15% – sharp, but far more manageable.

GDP in the second quarter, however, will drop 40% on an annualized basis. The budget deficit this fiscal year is expected to nearly quadruple to $3.7 trillion.

Some of the deadlines in the CARES Act are approaching. The small business loans were meant to cover eight weeks of payroll, a period that has already lapsed for companies that closed in mid-March when President Trump issued a national emergency declaration. The enhanced $600 per week unemployment benefit expires at the end of July.

The House on Friday passed a new $3 trillion CARES Act to replenish some funding, but it is unclear whether the Republican-led Senate will take it up.

Weeks after a V-shaped economic recovery was predicted in March, most economists and health officials have a darker message.

“It is quite possible this thing will stay at however many deaths it is a day indefinitely, just wobbling up and down a little bit as epidemics move to different places around the country,” said economist and Princeton University professor Angus Deaton.

“The sort of social distancing we are prepared to put up with is not going to do very much.”

(Reporting by Howard Schneider; Additional reporting by Susan Cornwell; Editing by Heather Timmons and Daniel Wallis)

Over 80% of U.S. small businesses expect longer impact of pandemic: survey

By Andrea Shalal

WASHINGTON (Reuters) – Eighty-one percent of small U.S. companies surveyed by Veem, a global payments network, expect the new coronavirus pandemic to affect their business over the next 12-16 months, and nearly 90% are bracing for an economic slowdown, the company said Monday.

San Francisco-based Veem, which helped thousands of small companies apply for loans under the federal government’s $660 billion emergency Paycheck Protection Program (PPP), said small businesses were moving quickly to adapt to the changing climate.

Of the 690 firms surveyed, 65% said they had either submitted an application for the federal aid or planned to do so in the near future, Veem said in its first report on the sentiment among small to mid-sized businesses.

The Small Business Administration has so far approved more than 2.5 million loans totaling $536 billion, it said Friday.

The U.S. economy – the largest in the world – has been particularly hard hit by widespread shutdowns aimed at containing the spread of COVID-19, the disease caused by the coronavirus. U.S. government data on Friday showed the unemployment rate surging to 14.7% last month. The White House said joblessness could hit 20% in May.

The crisis was having a mixed impact on small businesses, said Veem chief executive Marwan Forzley, with some companies struggling to survive, while others benefited as their businesses were deemed essential or they switched to working online.

“When you look at the data, there’s surprising resiliency with these small and mid-sized businesses. Despite all the uncertainty, they’re trying to make changes in their businesses, to … either benefit from the situation or repurpose their business so that they’re not as badly impacted.”

Nearly 70% of the companies surveyed cited some uncertainty about the U.S. economy in 2020, and 55% said they had already experienced some significant impact to revenue.

About 30% of the companies were more optimistic, suggesting that some industries were better positioned to thrive in the current environment, Forzley said, citing online retailers and other e-commerce businesses.

More than half of the companies reported moderate to high supply-chain disruptions as a result of factory shutdowns, border restrictions and industry-wide furloughs, and more than one third said they were now setting up regional supply chains or rapidly pivoting their supply chain to make needed supplies.

Nearly one-quarter of the companies were investing in new technology or aligning their information technology systems.

Liquidity remained a “key pain point”, the survey showed, with 52% of companies cutting operational costs and 59% applying for loans, the survey showed. Only 13% said they had not taken any measures to prepare for a slowdown.

Nearly 54% of the companies said they were freezing hiring and 23% were downsizing staff, but nearly 18% said they planned to increase staff training and support.

(Reporting by Andrea Shalal. Editing by Gerry Doyle)

Small U.S. businesses were already struggling. Then coronavirus hit

By Jonnelle Marte

(Reuters) – Many small businesses were struggling with funding shortfalls and financial challenges even before the coronavirus pandemic hit, leaving them with little cash on hand to weather the slowdown caused by the virus, according to data released by the Federal Reserve on Tuesday.

Many small firms, particularly the smallest businesses and those owned by black and Hispanic entrepreneurs, also lack traditional banking relationships, which could make it more difficult for them to receive financial assistance during the crisis.

“Small businesses nationwide now face unprecedented challenges as the country grapples with the significant economic and social effects of the COVID-19 pandemic,” Claire Kramer Mills, assistant vice president at the New York Fed, said in a statement.

The majority of small employers reported growing revenue last year and more than a third even expanded their staffs, according to the 2019 survey report of more than 5,500 small firms issued by the 12 Federal Reserve Banks.

However, two-thirds of the businesses said they faced financial challenges last year, according to the report, which focused on businesses with fewer than 500 employees.

In a supplemental brief, researchers at the New York Federal Reserve assessed the ability for small businesses to cope with a substantial hit to revenue, categorizing firms according to their financial health – a metric based on their profitability, credit scores and earnings. Among the “healthy” firms, only about 20% had enough cash saved to continue operating as normal after losing two months’ worth of revenue.

Most small businesses surveyed by the Fed said they would have to shrink their staffs, delay payments or scale down operations after taking such a hit. Many firms would need to go into debt or turn to personal funds to close the gap.

That hypothetical scenario – two months without revenue – posed to businesses owners at the end of last year is now a reality for many firms, which closed down or substantially reduced their operations because of nationwide efforts to contain the spread of the coronavirus.

A new $349 billion small business bailout fund launched last week to shore up businesses with fewer than 500 employees got off to somewhat rocky roll out last week after some banks grappled with unclear rules and inconsistent government infrastructure. Some banks initially said they were prioritizing existing customers, putting some small business owners at a potential disadvantage for the first-come, first-served program.

Only 44% of small businesses had turned to a bank for a loan in the past five years and just 6% had turned to a credit union, according to the Fed survey. Businesses with more than $1 million in annual revenue and those with white owners were more likely to have used banks for funding, while smaller businesses and those with black or Hispanic owners were more likely to have used online lenders.

(Reporting by Jonnelle Marte; Editing by Chizu Nomiyama)

Uncovered losses hurt U.S. small business in wake of 2017 storms: Fed

FILE PHOTO: The corner stone of the New York Federal Reserve Bank is seen surrounded by financial institutions in New York City, New York, U.S., March 25, 2015. REUTERS/Brendan McDermid/File Photo

By Reade Levinson

(Reuters) – Small businesses in the United States struggled with uninsured damages and lost revenue following a record-breaking year of hurricanes and wildfires, according to a Federal Reserve survey published on Tuesday.

The report by the Dallas, New York, Richmond, and San Francisco Fed banks examined 1,800 businesses with fewer than 500 employees in zip codes with disasters designated by the Federal Emergency Management Agency. It found, 40 percent of small firms in these areas had natural-disaster related losses, and 35 percent lost more than $25,000 in revenues.

The report paints a worrisome picture for local economies after a record-breaking year of weather and climate-related disasters that cost the United States an estimated $306 billion in 2017, the third-warmest year on record, according to the U.S. National Oceanic and Atmospheric Administration.

To see the report,  click here  .

“Small businesses are primary drivers of job growth and their ability to rebound from disasters is critical to regional economic recovery,” said Claire Kramer Mills, assistant vice president at the New York Fed.

Small businesses employ half of private-sector workers and are the primary creators of new jobs in the United States, according to a 2015 U.S. Census Bureau study.

The survey found last year’s storms hit minority communities particularly hard. Some 54 percent of Hispanic-owned firms in affected areas reported natural disaster-related losses, compared to 40 percent of White-owned firms and 35 percent of Black or African American-owned firms.

The storms hit lodging and retail businesses hardest. Some 52 percent of leisure and hospitality firms and 47 percent of retail firms in affected areas reported natural disaster-related losses, the highest shares of all industries.

Small and young businesses are especially vulnerable to extreme weather and other natural disasters compared to their larger counterparts. Financing options are limited: federal relief funds can take months to reach communities and few small business are insured against such storms.

The report found firms’ insurance holdings did not match the sources of their losses, which stemmed more from disrupted business than from damaged assets. Sixty-five percent of disaster-affected firms cited loss of power or utilities as the source of their losses. However, only 17 percent of affected firms had business disruption insurance at the time of the disaster.

Federal Reserve Bank officials who worked on the report said local governments can help bridge this insurance gap by helping business understand their vulnerabilities and purchase the relevant coverage beforehand.

(Reporting by Reade Levinson in New York; Editing by Lisa Shumaker and Nick Zieminski)

Long-awaited U.S. Republican legislation calls for deep tax cuts

A congressional aide places a placard on a podium for the House Republican's legislation to overhaul the tax code on Capitol Hill.

By David Morgan and Amanda Becker

WASHINGTON (Reuters) – President Donald Trump’s drive for the deep tax cuts that he promised as a candidate reached a major milestone on Thursday, with his fellow Republicans in the House of Representatives unveiling long-awaited legislation to overhaul the tax code.

The bill called for slashing the corporate tax rate to 20 percent from 35 percent and cutting tax rates on individuals and families by consolidating the current number of tax brackets to four from seven: 12 percent, 25 percent, 35 percent and 39.6 percent, which is now the top rate and would be retained.

Largely in line with expectations for the tax-cut plan they have been developing behind closed doors for weeks, the House tax-writing Ways and Means Committee proposed roughly doubling the standard deduction for individuals and families.

It also called for preserving the home mortgage interest deduction for existing mortgages and for newly purchased homes up to $500,000, as well as continuing the deduction for state and local property taxes, capped at $10,000. It would retain the tax benefits of popular retirement savings programs including 401(k) and IRA.

The bill is the starting gun for a frantic race toward what Trump and Republicans in the House and Senate hope will be their first major legislative victory since he took office in January: the enactment this year of a package of deep tax cuts.

“This is the beginning of the end of this horrible tax code,” House Ways and Means Committee Chairman Brady told reporters on Thursday as he entered a meeting with Republican lawmakers ahead of the bill’s release.

The bill would create a new family tax credit, double exemptions for estate taxes on inherited assets and repeal the estate tax over six years, while also allowing small businesses to write off loan interest, according to the document.

The bill would cap the maximum tax rate on small businesses and other non-corporate enterprises at 25 percent, down from the present maximum rate on “pass-through” income of 39.6 percent. It would also set standards for distinguishing between individual wage income and actual pass-through business income to prevent tax-avoidance abuse of the new, lower tax level.

It would create a new 10-percent tax on U.S. companies’ high-profit foreign subsidiaries, calculated on a global basis, in a move to prevent companies from moving profits overseas, the Wall Street Journal reported.

Foreign businesses operating in the United States would face a tax of up to 20 percent on payments they make overseas from their American operations, the Journal added.

 

MARKET REACTION

U.S. equities have rallied in 2017 to a series of record highs, partly on expectations of deep corporate tax cuts. They were down slightly on Thursday as initial details of the Republican plan emerged. Housing stocks fell; bank stocks initially fell but then cut their losses.

Investors cautioned the tax plan was preliminary and it was too soon to gauge the effect on specific industries and asset classes. Long-dated bond yields and the U.S. dollar were down.

“This was what the market has been waiting for,” said Sean Simko, head of fixed-income management at Sei Investments Co in Pennsylvania. “It’s pretty much what the market has heard and priced in for. We are also waiting for the Fed chair nominee announcement and the payrolls number (Friday). Until then, the markets are going to be pretty contained.”

Congress has not succeeded with comprehensive tax changes since 1986, when Republican Ronald Reagan was in the White House and Democrats controlled the House. Bipartisan cooperation led to the passage of that plan, but Republicans have frozen Democrats out of the process of developing this legislation and passed a budget plan that would enable them to pass it with no Democratic votes.

Independent analysts have said that, based on an outline of the plan previously made public, corporations and the wealthiest Americans would benefit the most, and the federal deficit would be greatly expanded over the next decade because of a loss of tax revenue.

Trump said at the White House this week that he wanted Congress to pass the tax overhaul by the U.S. Thanksgiving holiday on Nov. 23.

Trump, House Republican leaders and Republican members of Brady’s panel will then meet at the White House on Thursday afternoon. Trump is also meeting separately with Republican senators, who must also unite to pass the tax plan.

“We’re going to get it done,” added House Republican leader Kevin McCarthy.

Brady himself predicts the initial legislation will change next week, when his panel is due to begin preparing it for an eventual House vote.

While Republicans control the White House and both chambers of Congress, intra-party differences have prevented them from passing major legislation sought by Trump, as exemplified by the collapse of their effort to dismantle the Obamacare law. Any failure to pass tax cuts legislation would call into question Republicans’ basic ability to deliver on promises.

The bill must also pass the Senate, where Republicans hold a slimmer 52-48 majority and earlier this year failed to garner enough votes to pass a major healthcare overhaul. Senate Republican leaders have said they aim to finish their work on taxes by year-end.

Democrats have criticized the proposed tax cuts as a giveaway to corporations and the wealthy that would harm workers and middle-class Americans.

 

 

(Reporting by Amanda Becker and David Morgan; Additional reporting by Richard Leong, Susan Heavey and Susan Cornwell; Writing by Will Dunham; Editing by Lisa Von Ahn and Nick Zieminski)