Shutdowns mandated by the coronavirus are a pending apocalypse for small businesses, which employ 48 percent of American workers. The average small business has only 27 days’ worth of operating costs in cash reserves, with many holding far less than that. Businesses that either can’t reopen or are suffering a big drop in revenue will soon be insolvent. Some have already announced that they will be shutting down.

Keeping small businesses alive post-pandemic will require a massive injection of cash that only the federal government can provide. But a federal response will be neither fast enough nor big enough to help all the businesses that need it, in time to save them. Washington’s effort must be supplemented by local responses. Thankfully, these are already under way.

In Indianapolis, the Chamber of Commerce launched a $10 million rapid-response loan fund backed by capital from the city, corporations such as Anthem Insurance, and local philanthropies. The fund will provide bridge financing for businesses planning to apply for Small Business Administration (SBA) disaster-relief loans and also support smaller loans in the $1,000 to $25,000 range for smaller companies that may not be a good fit for the SBA. The program is already distributing funds. Other regional support programs include suburban Noblesville’s $10,000 small-business disaster grants. The Indianapolis approach exemplifies the region’s traditional reliance on civic-sector leadership, which looks to public-private partnerships to get things done.

Other cities are taking action using their own distinct models. Some are government-led, such as Los Angeles’s emergency microlending program or Seattle’s small-business stabilization fund, backed by Community Development Block Grant financing. Others are leaning more heavily on philanthropies or the nonprofit sector.

Bruce Katz, coauthor of The New Localism, estimates that, nationwide, as much as $500 million has already been raised for local small-business relief funds—but he believes that as much as $25 billion is needed. Raising that kind of capital quickly is far beyond the capabilities of most local communities. Federally appropriated funds in the CARES Act, such as those provided to the Economic Development Agency (EDA), which already seeds local revolving-loan funds, could potentially be leveraged to help expand local efforts.

The need to support small businesses is clear. The lifeblood of local neighborhoods and communities, they embody what is unique to a particular place, unlike large national businesses, with their uniform product and service sets. And small businesses are a pillar of America’s frayed civil society. Small-business owners have “skin in the game” for the success of local communities in a way that large national and global businesses, which can afford to take a portfolio view of local markets, do not. Small business are the ones that sponsor local organizations such as Little League teams. In the same way, local governments, philanthropies, and chambers of commerce have a much bigger stake in the survival of their small-business base than the federal government does. That’s why so many of them have already gotten busy to help out.

The coronavirus threatens to shift economic power away from small businesses toward large corporations that have significant cash reserves and credit lines that they can draw on to weather the storm. America’s big companies remain critical to our national well-being and global competitiveness, but it’s important to maintain a balance between them and small business. While other countries rely exclusively on centralized-government models, America looks to a uniquely distributed system of federal, state, and local government, plus the business and civic communities that do so much heavy social lifting. That means that local communities must act without waiting for Uncle Sam. The federal government should support these local efforts, in addition to its own programs, through the SBA and Federal Reserve.

Photo by Scott Olson/Getty Images


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